Property (Mann)
Fall 1998
Page 1 of 59
FIRST POSSESSION....................................................................................................................................4
ACQUISITION BY CAPTURE ...........................................................................................................................4
First in time rule ......................................................................................................................................4
Definitions ...............................................................................................................................................4
Wild Animals (Pierson v. Post) ..............................................................................................................4
Capture of Oil/Gas (Hammonds v. Central Kentucky Natural Gas) ......................................................4
Rule of Capture .......................................................................................................................................5
Consequences of Rule of Capture ........................................................................................................................ 5
ADVERSE POSSESSION ............................................................................................................................6
THEORY .......................................................................................................................................................6
Purpose ...................................................................................................................................................6
ELEMENTS ....................................................................................................................................................6
Vanvalkenburg v. Lutz .............................................................................................................................7
TACKING ......................................................................................................................................................7
Constructive adverse possession. ............................................................................................................7
Hierarchy of possession ..........................................................................................................................7
TERMS..........................................................................................................................................................8
Howard v. Kunto .....................................................................................................................................8
POSSESSORY ESTATES ............................................................................................................................9
INTERESTS IN LAND .....................................................................................................................................9
Fee Simple Absolute ................................................................................................................................9
Fee Simple Defeasable ............................................................................................................................9
Fee simple determinable ...................................................................................................................................... 9
Fee simple subject to condition subsequent ......................................................................................................... 9
Fee simple subject to executory limitation ........................................................................................................... 9
Fee Tail ................................................................................................................................................. 10
Life Estate .............................................................................................................................................. 10
Title reverting v. Title passing ........................................................................................................................... 10
FUTURE INTERESTS ............................................................................................................................... 11
GENERAL COMMENTS ................................................................................................................................ 11
TYPES OF FUTURE INTERESTS .................................................................................................................... 11
TRANSFEROR.............................................................................................................................................. 11
Reversion ............................................................................................................................................... 11
Possibility of Reverter ........................................................................................................................... 11
Right of Entry ........................................................................................................................................ 12
TRANSFEREE .............................................................................................................................................. 12
Vested Remainder .................................................................................................................................. 12
Contingent Remainder ........................................................................................................................... 12
Rule in Shelley's Case ........................................................................................................................................ 13
Rule Against Perpetuities ................................................................................................................................... 13
Exam Tips .......................................................................................................................................................... 13
Executory Interest.................................................................................................................................. 14
LANDLORD AND TENANT ..................................................................................................................... 15
LEASEHOLD ESTATES ................................................................................................................................. 15
The Term of Years ................................................................................................................................. 15
The Periodic Tenancy ............................................................................................................................ 15
The Tenancy at Will ............................................................................................................................... 16
Tenancy at will v. determinable life estate (Garner v. Gerrish) ............................................................ 16
DELIVERY OF POSSESSION ......................................................................................................................... 16
Holdover Tenants & Rules of Delivery (Hannah v. Dusch) .................................................................. 17
ASSIGNMENTS AND SUBLEASES ................................................................................................................. 18
Johannes de Silentio
Property (Mann)
Fall 1998
Page 2 of 59
Ernst v. Conditt ..................................................................................................................................... 18
Kendal v. Ernest Pestana, Inc. .............................................................................................................. 19
LANDLORD'S REMEDIES ............................................................................................................................. 20
Eviction ................................................................................................................................................. 20
Self-help................................................................................................................................................. 20
Berg v . Wiley ........................................................................................................................................ 20
ABANDONMENT BY TENANT ...................................................................................................................... 22
Sommer v. Kridel ................................................................................................................................... 22
TENANT'S RIGHTS ...................................................................................................................................... 23
Covenant of quiet enjoyment ................................................................................................................. 23
Constructive eviction ............................................................................................................................. 23
Reste Realty v Cooper ....................................................................................................................................... 23
Implied Warranty of Habitability .......................................................................................................... 23
Hilder v. St. Peter............................................................................................................................................... 24
Measure of damages in Hilder ........................................................................................................................... 25
Alternative Damages Calculations for Breach of Habitability ........................................................................... 25
SALE OF LAND .......................................................................................................................................... 26
OVERVIEW ................................................................................................................................................. 26
STATUE OF FRAUDS ................................................................................................................................... 27
Hickey v. Green ..................................................................................................................................... 27
MARKETABLE TITLE .................................................................................................................................. 28
Defects in Title .................................................................................................................................................. 28
Lohmeyer v. Bower ................................................................................................................................ 28
Conklin v. Davi ...................................................................................................................................... 29
DUTY TO DISCLOSURE DEFECTS AND WARRANTIES OF QUALITY .............................................................. 30
Stambovsky v. Ackley ............................................................................................................................. 30
Johnson v. Davis ................................................................................................................................................ 30
THE DEED AND WARRANTIES OF TITLE ..................................................................................................... 31
Brown v. Lober ...................................................................................................................................... 32
Frimberger v. Anzelloti ......................................................................................................................... 32
Mann's Comparison of Frimberger to Lohmeyer ............................................................................................... 33
Rockafellor v. Gray ............................................................................................................................... 33
Sweeney, Administratrix v. Sweeney...................................................................................................... 34
Rosengrant v. Rosengrant ..................................................................................................................... 35
MORTGAGE ............................................................................................................................................... 36
Bean v. Walker ...................................................................................................................................... 37
Transfer of the mortgagor’s interest ..................................................................................................... 37
Default by Mortgagor ............................................................................................................................ 37
Murphy v. Financial Development Corp. .............................................................................................. 38
Mann's Discussion of Equity in Murphy ............................................................................................................ 39
Equitable Conversion ............................................................................................................................ 40
Risk of loss ............................................................................................................................................. 40
RECORDING .............................................................................................................................................. 41
INDEXING ................................................................................................................................................... 41
Statutes for Recording ........................................................................................................................... 42
Shelter Rule ........................................................................................................................................... 42
CHAIN OF TITLE ......................................................................................................................................... 43
Deeds from common grantor of adjacent lots ....................................................................................... 43
Guillette v. Daly Dry Wall ..................................................................................................................... 43
Requirements for Recordation ............................................................................................................... 43
FAILURE TO INDEX ..................................................................................................................................... 44
Mother Hubbard Clauses ...................................................................................................................... 44
Luthi v. Evans ........................................................................................................................................ 44
Johannes de Silentio
Property (Mann)
Fall 1998
Page 3 of 59
NUISANCE .................................................................................................................................................. 45
Morgan v. High Penn Oil ...................................................................................................................... 45
Boomer v. Atlantic Cement Co. ............................................................................................................. 46
Spur Industries, Inc. v. Del E. Webb Development Co. ......................................................................... 46
PRIVATE LAND USE ARRANGEMENTS ............................................................................................. 47
Four kinds of servitudes ..................................................................................................................................... 47
Holbrook v. Taylor ................................................................................................................................ 48
Restatement 3rd of Property, Servitudes, 2.10 ................................................................................................... 48
EASEMENTS................................................................................................................................................ 48
Two forms of easements .................................................................................................................................... 49
Creation of easements - 5 ways.......................................................................................................................... 50
Transfer of easements ........................................................................................................................................ 51
Termination of easements .................................................................................................................................. 51
Willard v. First Church of Christ, Scientist ........................................................................................... 51
Van Sandt v. Royster ............................................................................................................................. 52
REAL COVENANTS (ENFORCEABLE AT LAW) ........................................................................................ 53
Requirements for burden to run ......................................................................................................................... 53
Requirements for benefit to run ......................................................................................................................... 53
Privity of Estate Defined .................................................................................................................................... 53
Touch and Concern ............................................................................................................................................ 54
Casebook Examples ........................................................................................................................................... 54
EQUITABLE SERVITUDES ............................................................................................................................ 54
Tulk v. Moxhay ...................................................................................................................................... 55
Sanborn v. McLean................................................................................................................................ 56
Neponsit Property Owners' Association, Inc. v. Emigrant Industrial Savings Bank ............................. 57
Real covenants v. equitable servitudes............................................................................................................... 58
COMMON INTEREST DEVELOPMENTS ............................................................................................ 58
Planned Unit Developments (PUDs) ................................................................................................................. 58
Condominiums ................................................................................................................................................... 58
Nahrstedt v. Lake Village Condominium Association, Inc. ................................................................... 59
Cooperative ........................................................................................................................................................ 59
Johannes de Silentio
Property (Mann)
Fall 1998
Page 4 of 59
First Possession
Acquisition by Capture
First in time rule

the first person to take possession of a thing owns it

corollary: a prior possessor prevails over a subsequent possessor
Definitions

refers either to facts indicating physical control and intent to exclude others from control or to a
conclusion by a court that a person is “in possession” and ought to be protected as a possessor

ownership is “title,” proved by showing documents signed by the previous owner or first possessor
transferring title to the present titleholder vs. possession is proved by showing physical control and the
intent to exclude others

a person is in constructive possession when the law treats him as if he is in possession, although in
fact, he is not or is unaware of it

Why the law protects possessors:

efficient way to protect ownership

protecting possession facilitates trade

protecting possession gives effect to expectations

an easy and efficient way of allocating resources

in cases of capturing wild animals, rewards for making item available to society

prevents a stronger person from ousting a possessor and disturbing public peace and order
Wild Animals (Pierson v. Post)
Facts. Pierson - D in original action - accused of trespass against Post. Post - P in original action claiming trespass. Post was chasing a fox across unoccupied territory While Post and the dogs were
chasing the wild fox, Pierson - who knew that the fox was be hunted by Post - killed the fox and carried it
off to prevent the other Party from catching it. Pierson did this in full view of Post.
Issue. By pursuing the fox with his hounds, did Post acquire property in the fox sufficient to sustain the
action of trespass against Pierson (for killing and taking it away)?
Holding. No. By mere pursuit, Post did not acquire a right to the fox as property. Therefore, his claim of
trespass against Pierson can not be sustained.
Rule. The hunter who mortally wounds AND then pursues a wild animal - OR who ensnares it and thus
deprives the animal of its free will, AND has brought animal under his control AND has intent to keep the
wild animal has established occupancy sufficient to claim that animal as property.
Terms.

Occupancy. the taking possession of property and use of the same.
Discussion.

pursuit alone vests no property or right in the huntsmen. A beast that is mortally wounded and is
pursued by the hunter who wounded him is the rightful owner of that beast.

possession can be physical or constructive
Capture of Oil/Gas (Hammonds v. Central Kentucky Natural Gas)
Facts. Case of first impression (no mandatory precedent). Appellee exhausted gas from its 15,000 acre
field, which was mostly under lease. After the exhaustion, Appellee brought in outside gas and forced it
into the earlier empty reservoirs beneath the field. Hammonds owns 54 acres within boundary of appellee's
field, which appellee never leased from Hammonds. Hammonds brought suit under trespass. Claiming
that her property was used by Appellee without her knowledge or consent, she sought to recover a large
sum for use and occupation of her land.
Holding. Hammonds loses b/c, under the rule of capture, she never owned the oil.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 5 of 59
Discussion. Hammonds had exclusive right to extract oil underneath property. Since she did not exercise
it, she loses any value of that gas. Court decides this way b/c once Central Kentucky releases gas back into
reservoir, it relinquishes its ownership. The oil belongs to whoever comes and extracts it. Right of owner
of surface to those minerals = exclusive right to extract it (right to capture it) or to exclude others from
extracting it.
Rule of Capture

Oil/gas are not owned by anyone until actually possessed by extraction. When reintroduced to original
natural condition, it is a mineral ferae naturae.

Owner of the surface has the exclusive right to seek to acquire the oil/gas below.

Under adverse possession.

If the same person owns both the surface estate and the mineral rights when adverse possession
begins, adverse possession of the surface includes possession of the minerals. The minerals are
treated as part of the adverse possessed land.

If the minerals have been severed by sale to another prior to entry of the adverse possessor upon
the surface, poss of the surface does not carry poss of the minerals. To start adverse poss running
against the minerals, the adverse poss must start removing them.
Remedies to possessor discussed on Yao page 2.
Consequences of Rule of Capture

Rule of capture assumes an infinite supply of a nonrenewable resource.

It is a legal incentive to produce resource quickly.

Physical. Mineral resources are depleted quickly so people or companies can reap financial benefits.

Economic. Market flood b/c of rapid production. This surplus of supply drives down price. May
encourage wasting: buy more while it is cheap but don't use it or use it less efficiently than possible.
This threatens ability of companies to survive, so cartels (OPEC) may evolve to regulate price and
production.

Generally rapid production of materials leads to physical and economic waste.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 6 of 59
Adverse Possession
Theory






If, within the number of years specified in the state statute of limitations, the titled owner of land does
not take legal action to eject a possessor who claims adversely to the owner, the owner is thereafter
barred from bringing an action in ejectment.
Once the owner is barred from suing in ejectment, the adverse possessor has title to the land.
A means of acquiring title to property by long, uninterrupted possession.
The running of the statute of limitations on the owner’s action in ejectment bars the owner’s claim to
possession AND also strips the owner of title and creates new title in the adverse possessor.
When you adversely possess, you cannot acquire any more than to which person against whom you are
adversely possessing has title.
Actual possession, titled owner, adverse claimant.
Purpose

Protects titled owner for duration of statute.

Rewards and encourages people to use land productively
Elements




Actual entry giving exclusive possession

Actual entry tolls the running of the statute of limitations.

Constructive possession. If actual entry on part of the land described in a deed, the possessor may
be deemed in constructive possession of the rest.

Exclusive possession. Means that part is not sharing possession with the owner nor with the
public generally

Does not mean solitary possession, b/c people can gain adverse possession as tenants in
common.
Possession must open and notorious

Person's adverse taking must give titled owner notice that adverse party is claiming his property.
This provides reasonable opportunity and notice to remove adverse possessor.
Possession must be adverse and under a claim of right

Can not be with owner's permission

If entry is permitted by or shared with owner, statute of limitations does not start running. Owner
has burden of proving permission

Objective Test

Actions of the possessor like those of an owner establishes adverse posssesion

Adverse possessor's state of mind is irrelevant: doesn't have to be aware she is taking land.

Subjective Test (Good Faith Test)

Possessor believes in good faith thought he had title.
Possession must be continuous for the statutory period

Requires only degree of occupancy and use that average owner would make of that property type.

An adverse use is continuous when it is made without a break in the essential attitude of mind
required for adverse use.

A person can be in continuous possession even though there are considerable intervals during
which the property is not used.

Seasonal use: use of a summer house only during the summer for the statutory period is
continuous use. (Howard v. Kunto)

Easements: intermittent use may allow party to acquire prescriptive easement if it does not suffice
to gain title by adverse possession.

Prescriptive easement. Right to use another's property that is

not inconsistent with owner's rights

acquired by a use
Johannes de Silentio
Property (Mann)
Fall 1998
Page 7 of 59



open and notorious
adverse and continuous for statutory period
Abandonment or any other intentional relinquishment of possession destroys continuity of
possession and resets the statutory clock.
Vanvalkenburg v. Lutz
Discussion.

Court finds that Lutz has not established adverse possession even though he has been on land for
longer than 15 year statutory requirement. Statutory clock either never started running or didn’t start
running until less than 15 years ago. Relates notion that elements of adverse possession can be
manipulated by courts and are subjective.

Statutory requirement provided that if claimant does not enter with color of title, adverse possession
can be claimed only where the land “has been protected by a substantial enclosure” or has been
“usually cultivated or improved.
Reasoning.

According to statute, adverse possession could only be established when party making that claim could
prove hostile, actual occupation of the land under a claim of title. Lutz fell short of this burden by not
meeting statutory requirements.

Cultivation not adequate to establish adverse possession.

No improvement to establish adverse possession.

His entry on land was not under a claim of title adverse to title possessor (in previous suit, said he
knew land was not his).

Property can not be claimed as an adverse possession if the party making that claim has already
conceded actual possession to another person.
Tacking
To establish continuous possession for the statutory period, an adverse possessor can tack onto her own
period of adverse possession any period of adverse possession by predecessors in interest. Thus, separate
periods of actual possession by those holding adversely to the titled owner can be tacked together, provided
there is privity of estate.

Without color of title. If the adverse possessor did not enter under color of title, his claim extends only
to such part of the land as he actually occupied in manner consistent with ownership of such premises.
Constructive adverse possession.

In general, actual possession of only a part of a property.

Activities relied upon to establish constructive adverse possession reach not only the part of the
premises actually occupied but the entire premises described in a deed to claimant's privity of
estate

Not a requirement in most states for adverse possession.

With color of title.

Defective Deed. Claim extends to entire property described in instrument if:

the adverse possessor enters in good faith (believing his paper title to the whole property
is valid)

he occupies a significant portion of the property compared to the whole

the tract described in the deed is recognized in the community as one defined parcel of
land.
 Without Color. Claim extends only to land actually occupied in manner consistent with ownership
of premises
Hierarchy of possession

actual possession by owner trumps constructive adverse possession

actual adverse possession trumps constructive adverse possession

constructive possession trumps no possession
Johannes de Silentio
Property (Mann)
Fall 1998

Page 8 of 59
So, if O has title to 100, but only occupies 40, A may adversely claim other 60. If O has title
but does not occupy any land, and A actually and adversely occupies 40 acres, A then
constructively possesses the other 60.
Terms





Quiet title action. A proceeding to establish P's title to land by bringing into court an adverse claimant
and there compelling him either to establish his claim or be forever after estopped from asserting it.
Estoppel. When a party is prevented by his own acts from claiming right to detriment of other party,
who was entitled to rely on such conduct and has acted accordingly
Privity. Material or successive relationships to same right of property.
Claim of title. Expresses the requirement of hostility or claim of right on the part of an adverse
possessor
Color of title. Refers to a claim founded on a written instrument or a judgment or decree that is for
some reason defective and invalid
Howard v. Kunto
Facts. Summer homes where deeds and lots were one off.
Rule.

If you have privity of estate, you can tack. Tacking may establish adverse possession as a matter of
law.

Continuity of possession may be established although the land is used regularly for only a certain
period each year.
Reasoning.

Summer occupancy to constitute continuous occupancy and allow tacking to fulfill statute limitations
requirement. To deny Kunto’s tacking would be to deny previous owner’s right to act like owners, i.e.
sell their property.

In present case, court decided that privity is a judicial recognition of need for reasonable connection
between successive occupants of property, so to distinguish them from trespassers.

Big difference between guarding titled landowner from trespasser and allowing successive landowners,
victimized by improper surveying, to retain possession of land that they reasonably believe is theirs by
title.
Exercises
CB 137
CB 142
CB 150
Problem 1
Problem 1
Problems 2, 3
See Notes
See Exercise1
See Notes
Johannes de Silentio
Property (Mann)
Fall 1998
Page 9 of 59
Possessory Estates
Interests in Land
For history, see Restrepo outline pages 5 - 7.
Hierarchy of Estates

Fee simple

Fee tail

Life Estate

Leasehold

Term of years
Fee Simple Absolute

"to A and his heirs"

Magic phrase used to be necessary at common law to create the fee simple absolute

Highest and most complete form of ownership possible.

Potentially infinite duration, but alienable.

After 1290, could not transfer fee simple absolute through will. Transfer after death governed by
succession of heirs.

If fee simple owner dies intestate fee simple inherited by his/her heirs generally according to local laws
of succession.
Fee Simple Defeasable

Potentially infinite duration, but not necessarily. Used to restrict use of land. Three types:
Fee simple determinable

automatically ends when some specified event happens

when event happens, fee simple reverts back to the grantor

fully transferable and inheritable, grantor has possibility of reverter

Possibility of reverter. Transferor need take no action for estate to revert back if
condition is broken.

Example. "O conveys Blackacre to school board as long as Blackacre is used for school
purposes"
Fee simple subject to condition subsequent

does not automatically terminate, but may be cut short at grantor’s election when a stated
condition happens

grantor has right of entry

Right of entry. Reassertion of original owner's right takes affirmative action by original
owner. Have to sue to get property back.

Example. "O conveys Blackacre to A, but if Tastykakes are ever sold on premises, grantor
has right to reenter premises."

O doesn't bring action, then A is in adverse possession. When statute runs, fee goes to A.
Fee simple subject to executory limitation

upon the happening of a stated event, fee simple is automatically divested in favor of a third
person (another grantee)

Creates an executory interest in third party: conveyer retains no interest in the estate

Example. O conveys Blackacre "to school board, but if within next 20 years Blackacre is not
used for school purposes, then to A."
Johannes de Silentio
Property (Mann)
Fall 1998
Page 10 of 59
Fee Tail

"to A and the heirs of his body."

Lesser property interest than fee simple.

In each succession, fee tail is carving out of lesser property right.

has potential of enduring forever, but will cease if and when first fee tail tenant has no lineal
descendants to succeed him in possession

lasts as long as the grantee or any of his descendants survives

inheritable only by the grantee’s descendants

Two possible future interests

Reversion.

grantor retains reversion which becomes possessory upon expiration of the fee tail (when A
has no more descendants)

Remainder.

"to A and the heirs of his body, and if A dies without issue, to B and her heirs.”

A has fee tail.

B has remainder in fee simple.

Reversion and Remainder cannot be overridden. Once prior estate terminates, holder of these interests
get property.
Life Estate

"to A for life"

If A transfers life estate to B, then B has life estate por autre vie.

B 's estate is measure by A's lifespan.

If B dies during A's lifetime, then life estate passes to B's heirs until A dies.

Duration of interest usually measured by grantees' life. However, it can be measured by life of
someone other than owner of life estate

Can be created in a class of people: "to the children of A for their lives, remainder to B"

Ways of creation

Determinable. "to A for his life so long as A remains unmarried"

Subject to condition subsequent. O grants "to A for life, but if A does not use the land for
harvesting Tastykakes, O retains right to reenter"

subject to executory limitation. "to A for life, but if B returns from Madagascar during A's life, to
B"

Fully alienable. Grantee gets nothing more than what life tenant had.

Person with life estate may not 'waste' or permanently impair

value of land

interest of person holding title

interest of person having some subsequent estate in the land

Life estate always followed by future interest: either reversion in transferor or remainder in transferee.
Title reverting v. Title passing

Inheritance taxes are often levied on property that passes by will or intestate succession.

Under such a statute, if O, owner of Blackacre, dies intestate leaving H as heir, an inheritance tax is
levied. Title passes from O to H.

However, if decedent O had life estate in Blackacre, no tax is levied at O’s death.

Life estate ends at O’s death. Nothing passes from O.

The land reverts to the person who gave O life estate.

No tax is levied on title reverting, only on title passing.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 11 of 59
Future Interests
General Comments






Presently existing nonpossessory interest.
Confer rights to enjoyment of property at future time.
Future holder may sue a life tenant who wastes property to enjoin him from continuing waste.
Future Interests are alienable.
Follow life estates.

Enables testator to control inheritance of land at death of person to whom he grants a life estate.
Conversion of Estates Principle

There must always be interests that add up to whole fee simple
Types of Future Interests


Transferor

Reversion

Possibility of Reverter

Right of Entry
Transferee

Vested Remainder

Contingent Remainder

Executory Interest
Transferor
Reversion

"Future interest remaining in transferor (or successor in interest of testator) who transfers a vested
estate of a lesser quantum than the vested estate that the transferor has."

Example. O has fee simple, conveys life estate to A. Has no right to possession during life of A.
When A dies, interest reverts to O.

There is always a reversion if a future interest other than a vested remainder in fee simple is created.

All reversions are vested remainders. However, they may or may not become possessory in the future.
They can be divested.

Divest. To cut short an interest before its normal termination. Complete loss of an interest in
land, or partial loss by virtue of others sharing it.

Example. O has fee simple, conveys to A for life, remainder to B if B survives A.

If B does not survive A, O has reversion.

If B survives A, O has reversion, but it is divested by B's interest becoming possessory.

Accelerate upon termination of the preceding estate and not subject to the Rule against Perpetuities.

Reversion is inheritable.
Possibility of Reverter

A future interest remaining in transferor (or his heirs) when a fee simple determinable is created. Can
only be created in transferor.

Fee simple determinable is fee that automatically ends when some specified event happens

Example. O conveys Blackacre to Tastykake Company so long as they used it for making Tastykakes.
If Tastykake Company stops use land for specified reason, O has possibility of reverter.

Transferor need take no action for estate to revert back if condition is broken.

If transferor does nothing, statute on adverse possession does not start for transferee.

It is alienable.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 12 of 59
Right of Entry

Exists when owner transfers estate as fee simple to subject to condition subsequent, where transferor
retains power to cut short or terminate estate. Can only be created in transferor.

Fee simple subject to condition subsequent is fee that does not automatically terminate, but may
be cut short at grantor’s election when a stated condition happens.

Example. O conveys Blackacre to Tastykake Company, but if it ceases to use land for making
Tastykakes, O has right to re-enter and retake premises.

Original owner has to take action (sue) to get property back.

If transferor does nothing, statute on adverse possession starts for transferee.

It is alienable in some states.

Other states. At common law, it is a chose of action and not a property right, and thus unalienable
when transferor is alive.
Transferee
Vested Remainder

Future interest in transferor that is capable of becoming a present estate upon natural expiration of
prior possessory estate created in same conveyance in which remainder is created.

Not subject to a condition precedent besides natural termination of prior estate.

Cannot follow fee simple. Follows fee tail, life estate, or term of years.

Example. O conveys life estate in Blackacre to A, with remainder to B and his heirs.

O has taken reversion and given it to B and his heirs. Turned reversion into vested remainder.

"and his heirs" indicates that it is transfer of fee simple absolute to B.

B's interest - a fee simple absolute - is fully transferable.

Types of vested remainders

Indefeasibly vested remainder. It is certain of becoming possessory in future and cannot be
divested.

O conveys to "A for life, then to B and his heirs."

Vested remainder subject to open. Vested in class of persons, at least one of whom can take
possession, and there is no condition precedent.

O conveys to "A for life, then to A's children and their heirs."

Before A has children, remainder is contingent.

Also called remainder subject to partial divestment.

Vested remainder subject to complete defeasance. Either:

vested subject to being divested by operation of a condition subsequent OR

vested subject to an inherent limitation of estate in remainder

Condition subsequent

O conveys "to A for life, then to B, but if B does not survive A, to C"

If B dies before A, C's executory interest divests B

Inherent limitation

O conveys "to A for life, then to B for life, then to C and his heirs"

A remainder can be both vested subject to open (partial divestment) and to complete defeasance:

O conveys "to A for life, then to children of A, but if no child survives A, to B"
Contingent Remainder

Given to an unascertained person or subject to a condition precedent

Unascertained person. Typically, unborn person.

Example. O conveys “to A for life, then to B’s heirs.” B is alive. Since heirs are not
determinable until B’s death, remainder is given to an unascertained person and therefore
contingent.

If B dies during A’s life, the remainder becomes a vested remainder in B’s heirs at B’s
death.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 13 of 59







Condition precedent. An express condition attached to the remainder that must occur before the
remainder becomes possessory

Example. O conveys “to B if B reaches age 21” or “to B if B survives A”
Contingent remainder must contain conditions that can be met before or simultaneous with termination
of prior estate.

If impossible, then must be an executory interest.
Alternate contingent remainders. If you have two contingent remainders and they turn on the flipside
of same conditions, then you have alternate contingent remainders.

If they turn on different conditions, they are not alternate contingent remainders: they are
successive contingent remainders.

Example. O conveys “to A for life, then to B if B survives A, but if B does not survive A, to C.”

B and C have alternate contingent remainders in fee simple. Based on the two flip-sides of
the same contingency: B surviving A.

There is a reversion in O with alternate contingent remainders.

At common law, the life estate can terminate prior to the life tenant’s death.

Must be a reversion when you have alternate contingent remainders b/c someone always
has to have right of reversion.
Destructibility of Contingent Remainders.

At common law, contingent remainders were destroyed if they did not vest upon termination of the
preceding life estate. Gap in seisin is not allowed.

Example. O conveys “to A for life, then to B and heirs if B attains the age of 21.” If B did not
reach 21 while A was alive, the contingent remainder was destroyed and there was reversion to
original conveyor.
Merger. If life estate and vested remainder or reversion in fee simple come into hands of same person,
any intermediate contingent remainders are destroyed. Vested remainders & executory interests are
not affected.
Non-Destructibility of Contingent Remainders.

In most states, destructibility of contingent remainder has been abolished. A contingent
remainder takes effect if the contingency occurs either before or after the termination of the life
estate, i.e. B in the above example would take the property if and when he reaches 21.
When facing contingent remainders, answer both ways, i.e. if destructible and if not destructible.
Rule in Shelley's Case

IF one instrument creates a freehold in land in A AND purports to create a remainder in A's heirs (or
the in the heirs of A's body), AND estates are both legal or both equitable, THEN remainder becomes a
remainder in fee simple (or in fee tail) in A. See Gilbert's page 98.

Effect is to join life estate and vested remainder into fee simple, the inheritance of which is taxable.

To circumvent Rule, "Grant to A for life, remainder to heirs of B."

Under Rule, contingent remainder AND life estate DNE fee simple.

Remainder is contingent upon B's death. It depends upon condition precedent regarding prior
estate.

Since remainder is contingent instead of vested, it may not be joined with life estate to create a fee
simple under the Rule.

Rule has been abolished in most states.
Rule Against Perpetuities

No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the
creation of the interest.

Applies to an option contract to purchase real estate: stipulate that option expires 21 years after its
creation.
Exam Tips

Classify interests in the sequence in which they appear. Go phrase by phrase in each sentence.

If anything less than fee simple is granted, there must be a reversion.

“and their heirs” = words of limitation to describe quantum of estate, a fee simple
Johannes de Silentio
Property (Mann)
Fall 1998




Page 14 of 59
To classify future interests after a life estate:

if the first future interest is contingent remainder in fee simple, the second future interest is
contingent remainder.

if the first future interest is a vested remainder in fee simple, the second future interest is divesting
executory interest (cannot be a contingent remainder)
Contingent remainder must always be supported by a prior vested interest.
Only executory interests can divest. So person divesting can not have a remainder.
Once you think you have identified an executory interest, ask how it operations. If it is something
divests a prior vested estate, then it is executory.
Executory Interest

For history, see Restrepo outline page 12.

Springing Executory Interest.

A future interest in a grantee that springs out of grantor at a date subsequent to granting of interest
that divests the grantor.

Example. O conveys "to A and her heirs when A marries." If interest of A becomes possessory, it
will divest the fee simple of O.

Shifting Executory Interest.

A future interest in grantee that divests a preceding estate in another grantee before that estate's
natural termination.

Example. O conveys "to A for life, but if B returns from Madagascar, to B and his heirs." This is
a fee simple subject to executory interest of B.

Even though it does not divest, a future interest in a grantee following a fee simple determinable by
definition must be an executory interest. It cannot be a vested remainder, b/c you cannot have a vested
remainder after a fee simple.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 15 of 59
Landlord and Tenant



Property law and contract law both applicable: a lease is both a conveyance of an estate in land and a
contract containing promises between landlord and tenant
Until recently, property law was seen as the dominant law in the L-T relationship.
Over the last 40 years, courts have been putting greater emphasis on contract principles. This has led
to developments to protect tenants:

Covenants are mutually dependent.

A material breach by one party is grounds for the other party to stop performing.

Represents a shift away from caveat emptor, which made rent and all other covenants
independent, making it difficult for a tenant to get the landlord to perform covenants.

Implied covenant of habitability.

Landlord must take reasonable steps to mitigate damages before seeking recovery against a
breaching tenant.

This is the growing minority view that takes contract law and imports lost volume seller rule,
i.e. L treat abandoned apt as vacant apt.
Leasehold Estates
The Term of Years

One day, two months, five years…

Estate that last for some fixed period of time, or for a period computable by formula that results in
fixing calendar dates for beginning and ending.

Term of years determinable. Must be for fixed period, but is terminable earlier upon occurrence of
some event or condition.

Tenancy of no fixed period terminable upon some event. Exists where lease is terminable upon
some event but of no fixed period.

Example. O leases to A "for the duration of the war."

Notice of termination is not necessary to bring estate to an end.

Not unilaterally terminable by either party.

Death of landlord or tenant has no effect on duration of term of years
The Periodic Tenancy

Month-to-month, year-to-year…

Lease for a period of some fixed duration that continues for succeeding periods until either L or T
gives notice of termination.

Half a year's notice is required to terminate year-to-year tenancy.

For tenancy less than year, notice of termination must be equal to length of period, but not to exceed
six months.

If you rent month-to-month, and decide March 18 to terminate, you must pay for tenancy through
April 30.

If notice of termination is not given, the tenancy is automatically extended for another period.

Where the lease provides for an annual rent payable monthly, common law holds the estate is from
year to year, which requires six months notice for termination.

Death of landlord or tenant has no effect on duration of periodic tenancy.

Unilateral power to terminate a lease can be engrafted on term of years or periodic tenancy. This
creates a determinable tenancy, not a tenancy at will.

Example. A lease by L to T for 10 years or until L sooner terminates creates a term of years
determinable.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 16 of 59
The Tenancy at Will

Tenancy of no fixed period that endures so long as both L and T desire to continue. Either L or T can
terminate at any time.

If tenancy at will has been created and lease provides that it can be terminated by one party, it is
necessarily at will of other as well.

30-day period of notice usually required (or period equal to time between rent payments) for one party
to terminate tenancy of will.

If tenant has possession, he has an estate in land.

Tenancy at will ends when one party terminates it, or at death of one of parties.

Terminated either by acts of parties or by operation of law (sale, assignment, death)
Tenancy at will v. determinable life estate (Garner v. Gerrish)

Facts.

Owner leased premises to Gerrish.

Duration of lease was "for and during the term of quiet enjoyment from first day of May 1977
which term will end - Gerrish has privilege of terminating this agreement at date of his
choice." Italics are handwritten words.

Lease said landlord had right of reentry if rent was not paid timely, qualified in handwriting that
Gerrish had 30 day grace period for payment.

Garner becomes executor of Owner's estate. Serves Gerrish with notice to quit premises.

Gerrish refused to quit, so Garner commenced summary proceeding to have him evicted.

Issue. Does a lease that grants T right to terminate agreement at date of his choice create a
determinable life tenancy on behalf of T, or does it merely establish a tenancy at will?

Holding. T has determinable life estate (exclusive right to terminate).

Reasoning.

In earlier times, livery of seisin was necessary to create a life tenancy that was a fee interest. If no
livery of seisin, then a mere tenancy at will would result.

Since livery of seisin has been abandoned, there is no reason why a lease granting tenant exclusive
right to terminate should be converted into tenancy at will terminable by either party.

Lease clearly grants tenant right to terminate, and does not reserve a similar right for landlord.

To hold that such a lease grants a right to terminate in both parties would violate terms of
agreement and express intent of contracting parties.

If a leasehold has no certain duration but is terminable at will by one party, the courts are split.

some courts imply a power of termination in the other party since there is no certain duration.
Thus, a tenancy at will is created.

other courts hold that if the agreement does not create a term of years or periodic tenancy, but the
tenancy is to continue so long as the tenant wills, the tenant has a life estate determinable.
Delivery of Possession
Holdover Tenant (Tenant at Sufferance)

tenant who is rightfully in possession but wrongfully remains in possession after termination of the
tenancy.

not really a tenant at all since he is not holding with the permission of the landlord. On the other hand,
he is not a trespasser either, since his original possession was not wrongful.

Tenancy lasts only until the landlord evicts the tenant or elects to hold the tenant to another term.

How to deal with one of these jerks…

English rule (majority view)

Landlord has duty to deliver actual possession, as well as right to possession, at beginning of the
term.

Reasoning

Tenant bargains for use of property, not a lawsuit against the prior tenant
Johannes de Silentio
Property (Mann)
Fall 1998
Page 17 of 59


Landlord more likely to know if the previous tenant will move out, in a better position to
pressure him to do so.

Courts have found that this can be contracted around 9/10 times.
American rule (minority view)

Landlord has no duty to deliver actual possession at the commencement of the term.

Reasoning

Lease conveys a leasehold to the tenant. It is up to the tenant to take possession of his
property if he wants it

Tenant has right to evict the hold-over tenant by summary proceedings. Needs no additional
remedy against landlord.

L should not be held liable for the tortious act of the holdover

Since L is not required to evict a trespasser after the tenant takes possession, L should not be
required to evict a trespasser before the tenant takes possession.

Vacancy rates will affect which side has greater bargaining power
Holdover Tenants & Rules of Delivery (Hannah v. Dusch)

Facts. At beginning of lease term, tenant unable to take possession b/c hold-over tenant still in
possession.

Rule. Court adopt American rule: there is no implied covenant for lessors to delivery actual
possession to lessees; they must only deliver legal possession.

Mann's Comments on Hannah

Residential tenants more worthy of protection of implied covenants than commercial tenants.

Residential tenants have greater need of protection - they need leased property for shelter, have
most likely sold or terminated lease of prior home.

If no implied covenants, then landlords could take advantage of them by adding new terms to
lease.

Residential tenant at mercy of L's greater bargaining power (if you don't agree to new terms,
you're out on street).

In general, commercial tenants have more bargaining power than residential tenants.

Commercial T and L, on average, are more like equals.

Residential T and L, on average, are less equal.

Hannah Court prefers American Rule. However, Recent legal trend has been to imply covenants.
American rule places great weight on express terms of agreement.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 18 of 59
Assignments and Subleases






Privity of estate: based on mutual relationship with same estate, any assignee of the tenant is in privity
of estate and is liable on the covenants in the lease. Similarly, LL is liable to the assignee on the LL’s
covenants. Parties in privity of estate have a LL and tenant relationship.
Privity of contract: if there is privity of contract, their obligations bind them regardless of whether or
not they are in privity of estate.
ASSIGNMENT

In absence of prohibition in lease, lessee transfers his entire interest under a lease to third party.

Original lessee retains no interest in the estate.

Assignee comes into privity of estate with the landlord => LL and assignee are liable to each other
on the covenants in the original lease that run with the land.

Has no effect on privity of contract b/n lessee and lessor, which can be terminated only by express
agreement
Covenants running to assignees
For the landlord to be able to enforce a covenant in the lease against the tenant’s assignee, or for
the tenant to be able to enforce a covenant in the lease against the landlord’s assignee, the
following requirements must be met:
1) intention: the parties to the lease must intend that the covenant run to assigns
2) privity of estate: the assignee must be in either privity estate or privity contract with the
person who is suing or being sued. If the assignee has promised to perform the covenant, the
assignee’s liability rests on privity of contract as well as on privity of estate
SUBLEASE

Lessee transfers portion of his interest under the lease to third party, lessee retains an interest in
the leasehold (reversion). Lessee becomes the landlord of the sublessee, lessee and sublessee in
privity contract and estate. Sublessee is not in privity of estate/contract with the landlord unless
there is an express assumption of all covenants by sublessee; assumption creates privity contract
b/n LL and sublessee by third party beneficiary rule.
To distinguish between a sublease and assignment:

Common Law. Look at what rights are transferred/retained

Modern Rule. Look at intent of the parties, language of contract, i.e. reservation of additional rent
by itself is indication that parties intended a sublease, relationship of LL & T b/n lessee and third
party indicates sublease.
Third Party Beneficiary Rule

If an assignee or sublessee expressly assumes the covenants of the master lease, the assignee or
sublessee is directly liable to the landlord as a third party beneficiary of the contract between the
tenant and his assignee or sublessee.
Ernst v. Conditt

Facts.

Ernst leased land to Rogers.

In lease it stated that lessee is still liable to perform covenant of lease in event of assignment or
sublease.

Rogers sold business to Conditt and 'subleased' property with Ernst's express permission.

Conditt promised to take over lease from Rogers.

At end of lease, Ernst sued Conditt seeking past-due rent and removal of improvements on
property .

Holding. Agreement between Rogers (original lessee) and Conditt is an assignment: a complete
transfer of interest in property from one to the other.

Rule. Technical rules for the construction of conveyances aside, look to language of bill to determine
whether parties intended to construct assignment or sublease.

Reasoning.

Court found privity of estate between Ernst and Conditt even though contract called transfer from
Rogers to Conditt an sublease. This is because at end of lease estate reverts to Ernst, which would
not be true if it were a sublease from Rogers to Conditt.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 19 of 59



Rogers' agreement to remain liable to P for performance of lease (in the amendment) did not
create a reversion or right to re-entry in Rogers.

By assignment, privity of estate between lessor and lessee is terminated

In amendment, Rogers parted with entire interest in property for the entire term: this was in
exchange for D's promise to perform all conditions of lease as amended.

Obligations of lessee to lessor are not affected by an assignment or subletting to a third party.

Rogers agreed to be liable to P for rent and expense of removing improvements upon D's default.
This does not amount to express or implicit right to re-enter.
Mann's comments.

Before assignment to Conditt, Rogers and Ernst have successive interest in property. Privity of
estate.

After assignment, Ernst and Rogers are not in privity of estate. But they have privity of contract.

Assignment of land does not affect privity of contract between Ernst and Rogers.

Rogers and Conditt have privity of contract.
Illustrations.
E
(lease)
R
(assg.)
C
(assg.)
T1
(assg.)
T2
T2 stops paying rent. Who could E sue? T2 and R. P/c with R, p/e with T2. E can't sue C or T1, because
there is not p/e. Fully transferred to T2 thru assignment.
However, if C agrees to specific clause in assignment instrument saying he will honor K terms of original
lease (between E and R), then E can sue C for p/c, in addition to R and T2 for the aforementioned reason.
So if you're smart, when assigning a lease include a clause like R that establishes p/c between E and C.
E
(lease)
R
(assg.)
C
E and R have p/c. This is why R has to pay E when C defaults.
E and C have p/e. This is why E can sue C.
R and C have p/c. This allows R to sue C for payment if E choose to sue R for C's default.
Also, E and C have p/c. Established by C's agreement to clause in assignment instrument that he would
honor terms of original lease. This another way that E could sue C, but not the reason in the case.
Kendal v. Ernest Pestana, Inc.

Facts.

Lease at issue is for airport hangar space.

City of San Jose leased it to Perlitches.

Perlitches subleased hangar for 25 years to Bixler.

After sublease to Bixler, Perlitches assigned their interest to Earnest Pestana, Inc. So, Bixler was
now tenant of Pestana.

Bixler agreed to sell business to Kendall. Proposed sale included existing lease.

Lease stated that written consent of lessor (Pestana) was required before lessee (Bixler) could
assign his interest. Failure to obtain consent rendered lease voidable at Pestana's discretion.

Pestana refused to consent to assignment, claiming an absolute right to refuse arbitrarily any
request.

P claims D demanded increased rent and other terms as a condition of his consenting to Bixler's
transfer of interest.
Johannes de Silentio
Property (Mann)
Fall 1998



Page 20 of 59
Holding. Court said that where there is no provision that says a lessor will not unreasonably withhold
his consent for a lessee to assign his premises, a lessor cannot unreasonably and arbitrarily withhold
that consent.
Rule. If a lease allows lessee to assign his interest only with prior consent of the lessor, consent may
be withheld only if lessor has commercially reasonable objection to the assignment. This is minority
rule regarding unreasonable objection to assignments.
Reasoning. Commercial reasonableness protects original lessor's interest in property. Factor that
determine commercial reasonableness:

financial responsibility of assignee

suitability of proposed use

legality of use

need for alteration of premises

nature of occupancy (type of business assignee would conduct)
Landlord's Remedies
Eviction

Either during term of lease for nonpayment of rent or breach of covenant or other reasons or when
tenant holds over after the term expires. L has two judicial remedies:

Suit in ejectment. To recover possession of premises. Rarely used by L, takes long time.

Summary proceedings. L can recover possession quickly and at low cost theoretically. In reality,
time-consuming and expensive. Summary proceedings cut off tenant’s defenses and just looks at
whether rent has been paid.
Self-help

Common Law.

Permitted such use of force necessary to expel the tenant.

L may rightfully use self-help to retake leased premises from T in possession without incurring
liability for wrongful action provided:

L is legally entitled to possession where T holds possession adversely.

L's means of reentry are peaceable.

Under rule, T may recover damages for wrongful eviction where:

L has no right to possession, OR

Means used to remove T were forcible,

Or both. So, T could recover damages if L had right to possession but used forcible means.
Under this doctrine, forcible entry now considered a crime in almost all states.

Some states still follow common law rule allowing L to use reasonable force to expel tenant.

Some states hold that L can enter only by peaceable means.

Changing the locks and locking out the tenant has been held as forcible (Berg v. Wiley)

Modern Doctrine.

L must always resort to judicial process to enforce statutory remedy against T wrongfully in
possession.

Any self-help by L reentry against T in possession is wrongful and puts L on hook for damages.

That T is adversely or wrongfully possessing land is not an excuse.

A lease may provide for self-help but some jurisdictions find such clauses void if they are contrary
to public policy. However, most courts hold such a provision is valid.

Argument against contracting around bar to self help is that doing so violates fairness.

Assumes equal footing of parties to negotiation that is not the case.

Self-help provisions contravene public policy to avoid violence.
Berg v . Wiley

Self-help case (L locks out T)
Johannes de Silentio
Property (Mann)
Fall 1998



Page 21 of 59
The resort to judicial process is the only lawful means to dispossess T who has neither abandoned nor
voluntarily surrendered claim, but claims possession adversely to L's claim of breach of a written lease.
Self help can only be used where there is abandonment of property by tenant.
Here the self-help was only non-violent b/c tenant was not around: that's not good enough.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 22 of 59
Abandonment by Tenant

When confronted with an tenant who has abandoned, a Landlord may:

Terminate lease.

Makes tenant liable only for rent accrued and for damages caused by abandonment. Or, L
may seek additional damages ONLY IF he seeks to mitigate damages caused by the
abandonment.

Mitigation is minority rule. Contract aspect of lease.

Leave premises vacant

Majority rule is no duty to mitigate

If L does nothing, he can sue for rent as it comes due.

Property aspect of lease. In property law, entire right to property was conveyed to lessee. So
L would have no duty.

Rent acceleration clauses allow one suit for all future rent due upon default.

Recent trend is that L has duty to mitigate damages: lease is treated as kind of contract.
Sommer v. Kridel
Facts. Kridel never occupied. Sommer let it sit empty and wants to collect 1.5 yrs of rent.
Holding. L has a duty to mitigate damages from defaulting T by making reasonable efforts to re-let the
wrongfully vacated apartment. Decided on Minority view, emphasizing contract aspect of lease.
Reasoning.

Duty to mitigate exists in contracts, b/c interest in property does not shift entirely to lessee. There
are implied duties between L and T (L provides maintenance). Equity.

In general under contract law, a party claiming damages for a breach of contract has a duty to
mitigate his loss.

Vacant Stock Rule. Apartment should be treated like part of vacant stock. To mitigate, L does not
actually have to rent the apartment in question. Where L has other apartments vacant, duty to
mitigate consists of reasonable efforts to re-let.

Use of vacant stock rule does not compensate L where all the apartments are basically the
same, b/c L will still have one apt short of full occupancy until the last comparable apt is
rented out. Thus, tenant liability does not end until last comparable apt rents out.

This shifts burden of proof from breaching party to non-breaching party b/c L in better
position to show reasonable efforts. Simply reletting apt does not effect surrender by
original tenant.

common law of caveat lessee => move to applying contract law to the lease

Mann's comments.

How do you assign vacancy from Kridel's breach? When all apartments are occupied? How
do you prevent L from always being one down in occupancy? Does Kridel's liability stop
when his former apartment is rented, or when all vacancies are occupied?

Possible applicable contract rule is lost volume seller's rule. Damages for which buyer is on
hook until entire supply is sold.

According to this, Kridel is on hook until all apartments are occupied. No jurisdiction
does this. If vacant stock rule is applied, it is done the way Kridel did.

If L finds new tenant, T normally has remaining obligation to pay L's cost for finding new
tenant.

Additionally, L may recover under anticipatory breach: that is, L may recover difference
between past defaulting T's rent and market value for unexpired term of breached lease. This
varies with jurisdiction: if anticipatory breach is allowed, then L would recover the difference.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 23 of 59
Tenant's Rights
Covenant of quiet enjoyment

A covenant inserted in lease, usually by grantor, promising that the tenant or grantee shall enjoy
premises in peace and without disturbance.

Protects T's right to freedom from serious interference with his or her tenancy by action or forbearance
of L or agent of L.

Immaterial whether covenant is express or implied.

Breach by actual or constructive eviction.
Constructive eviction

Breach of covenant of quiet enjoyment.

Elements

substantial interference

T suffered some action or inaction by L that renders premises untenantable.

T vacates within reasonable time

condition is fault of L.

When T establishes constructive eviction, releases T from all duties of lease and allows T to vacate
without penalty.

Otherwise, T could stick out and seek damages relief against L.

If T loses on this claim, T is liable for all unpaid rent. Rent is not diminished b/c of condition of
premises.
Reste Realty v Cooper

Facts.

Recurring water leak into offices. Two leases, first signed without knowledge of flooding prob.
Second signed with knowledge but with assurances from L’s agent that prob would be remedied.

Holding.

Plaintiff entitled to constructive eviction b/c she reasonably relied on promise that prob would be
fixed.

Reasoning.

Ct found she had moved within reasonable time frame: this is factual, circumstantial
determination.

Quiet enjoyment is implied in the lease.

Since L render premises substantially unusable for purpose for which leased, it is a breach of
covenant of quiet enjoyment and constitutes constructive eviction.

Policy. Without this doctrine, tenant could sue for damages but left with unusable place.
Implied Warranty of Habitability

L has duty to ensure that premises he leases to T are fit for human habitation. Sufficiently safe, clean,
and comfortable for humans.

housing code violations are compelling but not conclusive evidence of breach

Major break with common law position of caveat lessee.

T need not be constructively evicted for breach to occur. T must give landlord notice and allow
reasonable time to remedy.

Patent defects. Even if defects are obvious to T before signing the lease, L still has obligation to
remedy the problem

Policy. Don't want to give L's the ability to rent premises that are inhabitable in a market where there
is insufficient rental property for demand of consumers.

Dependent covenant doctrine. T is relieved of his obligations when L breaches the implied covenant
of habitability.

Violation of covenant by L is defense to action L for failure to pay rent.

Reasoning
Johannes de Silentio
Property (Mann)
Fall 1998
Page 24 of 59






modern urban residential T do not have the time to inspect premises and put them in tenantable
condition

because of housing shortages, T have much less bargaining power than LL

L knows more about defects and is in a better position to remedy them

housing codes have not been enforced and more effective enforcement will result by giving
tenants right to sue

importing UCC implied warranty of fitness in sale of consumer goods

difference between implied warranty of fitness in contract setting and implied warranty of
habitability in housing: no substitute goods in housing context. L often cannot absorb the
costs not covered by rents.
Contract Analysis

parties are free to bargain and when one party raises breach of warranty, the other party raises
defenses. But these defenses are not allowed in L/T relationship.

The status relationship is not based on the contract but on L and T relationship.

Cannot contract around covenant of implied warranty b/c public policy.
Illegal lease

Lease of premises that the L knows substantially violates the housing code is an illegal agreement
if the code prohibits rental of premises in violation of the code.

Otherwise it is legal for the L to rent property with housing code violations and the L must fix
defects within certain time period.
Remedy for breach of implied warranty:

Rescission

Reformation (court-ordered rewriting of contract terms to correct agreement)

Damages

Withholding payment of future rent

Landlord will then have expense of bringing suit (who can better afford to bring action).
Must show that:

Landlord had notice of previously unknown defect and failed to repair it in reasonable
amount of time; and

Defect existed during time for which rent was withheld.

Once defect is corrected, tenant must pay rent again.
Duty to repair is not implied warranty. When it is a covenant, it is an independent covenant: thus, T
cannot withhold rent - can only sue for damages or specific performance.
Implied warranty exists in

residential leases

no commercial leases, except where T rents office and not entire building

no residential real estate sales (not necessary b/c of equal bargaining power, independent
inspections)
Hilder v. St. Peter

Facts. Slumlord rents really disgusting apartment to grandmother and her daughter's single-parent
family.

Rule.

In the rental of any residential property, there is an implied warranty of habitability that binds the
landlord to the tenant.

Applies to tenancies for a specific period or at will.

Implied warranty of habitability covers all latent and patent defects in the essential facilities
of the residence.

Tenant who enters a lease agreement with knowledge of defect cannot be said to have
assumed the risk, and thereby violate the warranty.

Implied warranty can not be waived by any written provision in lease or by oral agreement.

Note. B/c of holding, constructive eviction is no longer viable. Where tenant seeks damages for rent
already paid, but not to escape rent liability, such abandonment is not necessary.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 25 of 59
Measure of damages in Hilder

Expectation damages. Fair market value warranted - fair market value as is.

As applied in Hilder v. St. Peter, plugged in agreed upon rent - 0.

Used agreed rent for fair market value b/c that's what a consumer paid for premises, not
knowing uninhabitable condition.

Fair market value not always based on what one consumer would pay for property. Could be
based on comparison to rents for comparable properties (that are habitable).

Burden on party claiming breach of implied warranty to introduce evidence about fair market
value warranted of property. Using this comparison may get party more damages.

Using 0 for value as is was way for court to make point.

Since P waived claim to punitive damages by not appealing the issue, this allows court to give
her some additional award for D's willful and malicious breach of implied warranty.

There could be breach but no damages under this formula.
Alternative Damages Calculations for Breach of Habitability

Difference between agreed rent and fair rental value of premises.

If your agreed rent is higher than fair market value, then you want to use this calculation instead of
Hilder formula.

Similar to formula used in Hilder.

Percentage-diminution approach.

Agreed rent is reduced by percentage equal of lease-value lost by tenant in consequence of
landlord's breach.

Punitive damages are available where the breach of implied warranty is willful and wanton, which is
shown by conduct manifesting personal ill will or carried out in circumstances of insult or oppression.

Where landlord has received notice of defect and fails to repair the facility that is essential to
health and safety of tenant, punitive damages may be awarded.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 26 of 59
Sale of Land
Overview






Sale is a transaction between seven self-interested parties. Buyer, seller, real estate agent (2), lawyer
(2), and lender.

Real estate agents split commission on sale, so they want to go complete deal as soon as possible:
don't necessarily care about their clients.

Besides buyer and seller, none of the parties are concerned with the successful completion of deal
and interests of other parties.
Steps of typical house purchase transaction

Consult real estate agent.

Employ own attorney to draft proper contract.

Most buyers sign printed form supplied by real estate agent (not necessarily wise)

After signing contract, buyer acquires credit and the assurance that the seller has good title to
convey to him.

Complete loan application and order appraisal of property to be purchased.

Investigation of title.

Three types of title assurance:

Title search.

Tracing chain of title (through public records)

Abstract search.

In either of the first two assurance types, attorney for mortgagee may demand a certificate of
title insurance from a national company

There are local title insurance companies. They search its own title plant, issue policy based
on outcome of search. Policy is used in lieu of conventional attorney's certificate.

Closing.

Bring all interested parties together and permit them to execute and deliver necessary
documents simultaneously with payment of purchase price and settlement of costs of
transactions.

Recording.

Mortgagee's attorney sends deed and mortgage to courthouse for attachment of revenue
stamps. Mortgagee then gets a certificate of title: he now has titled to property, subject to
mortgage.
Terms/Concepts

Rescission. Each party reverts to position prior to contract. Cannot be unilateral, must be
bilateral or imposed by Ct.
Earnest Money. Customary down payment (usually 10% purchase price).

Money generally held in escrow until performance of contract or court order.
Contingencies. Used to guard against unexpected developments.

Inspection contingencies. Generally call for inspection by purchaser’s inspector w/in short period
of time of signing of contract.

Fine tuned to allow correction of flaws found during inspection up to certain dollar amount.

That means buyer cannot use repairs up to that value to rescind the contract.

If it exceeds then buyer and seller return to negotiating table.
Revocation. Statute of Frauds applies to making of contract, not to revocation.

Written contract for sale can be revoked by oral agreement by both parties in most states.

In some states, revocation must be in writing

Theory is that contract creates equitable title in the buyer and revocation is really a transfer of
equitable title back to seller.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 27 of 59
Statue of Frauds








Oral contract for sale of land will not pass muster.
No interest in land can be created or transferred except by an instrument in writing signed by party to
be bound thereby.

Exception is leases for less than 3 years.
In United States, treated more like standard than rule. Most law relating to Statute is judge-made.
To satisfy Statute and transfer an interest in land, a memorandum of sale must be

signed by party therein bound,

describe the real estate, and

state the price.
If parties are negotiating with an understanding that the terms of the contract are not fully agreed upon
and a written formal agreement is contemplated, a binding contract does not come into existence until
the formal contract is executed (CB 593, 3c)
Where price is agreed upon, it is generally considered an essential term that must be stated.
Contract is not enforceable unless parties refer to price and indicate method they will use in fixing it.
Contract stipulating "fair market value" as price is enforceable.

An agreement may be binding without an agreement on specified price.

If no agreement exists in writing, court may imply an agreement to pay a reasonable price.
Exceptions to Statute are part performance and estoppel.

Part performance.

Definition varies by jurisdiction.

One theory is acts of parties substantially satisfy evidentiary requirements of Statute.

If acts make sense only as having been performed pursuant to oral contract, they
constitute part performance.

Originate in equity suits for specific performance. Does not apply to damages suits.

Other theory is to prevent injurious reliance on contract

Estoppel.

Where injustice can be prevented only by enforcement of contract. See K notes - promissory
estoppel, but what is herein considered is equitable estoppel.

Also applies where unjust enrichment would result if party who received benefits of other's
performance were allowed to rely upon Statute.

Originated in equity, but can be used in damages suits.
Hickey v. Green

Facts. D owned vacant lot that she advertised for sale. Parties orally agreed to sale at $15,000. On
day they agreed, D accepted deposit check from P for $500. Payee was not listed but, writing back
specified what lot it was for Green's lot. P had told D he intended to sell home and build on D's lot.
Based on arrangements with D, P advertised and sold their house. Took $500 check from purchaser
and deposited in their bank. On back of check, P wrote "deposit on purchase property." 12 days after
being paid by P, D told P she decided to sell to someone else for $1000 additional.

Issue. Can an oral agreement for sale of a house be enforced even though it does not comply with
Statute of Frauds?

Court held Yes.

Rule.

Notwithstanding failure to comply with Statute of Frauds, a contract for transfer of an interest in
land may be specifically enforced if party seeking enforcement acted

in reasonable reliance on contract and on continuing assent of adverse party; and

has so changed his position that injustice can only be avoided by specific enforcement.

Note.

Court applies specific performance because Hickeys had an obligation to sell their own house, so
damages hard to calculate.

Green could have made restitution if Hickeys had not suffered irreparable harm from purchaser of
their home seeking specific performance against them. Courts seldom grant specific performance
and when they do, it is almost always granted to buyers. (CB 593, problem 3)
Johannes de Silentio
Property (Mann)
Fall 1998
Page 28 of 59
Marketable Title





Title reasonably free from doubt, one which a prudent purchaser would accept, no reasonable
probability that buyer will be subject to a lawsuit. Perfect title not required.
Prove by showing good record title.

Example. Person has unencumbered fee simple or at least encumbrances on record accounted for
in contract
Unless there is a provision in the contract of sale to the contrary, it is implied that the seller must
furnish buyer with good and marketable title at closing
Many states hold that marketable title can be based on adverse possession.

adverse possession must be clearly proven

seller must offer written evidence or other proof admissible in court that the buyer can use to
defend any lawsuit challenging title
Title insurance only protects against risks on record. Title warranties protect you against off-record
risks
Defects in Title

Defects in record chain

Private encumbrances

mortgages, liens, and the next two

Easements

waivable by purchaser.

if it lessens value of property, it makes title unmarketable.

if it benefits property, title may be marketable.

Covenants

if contract expressly states that property has been purchased for a particular use, and such use is
allowed by private covenant, title may be marketable.

waivable by purchaser (this does not waive violation thereof).

for a covenant to be an encumbrance, it must be in writing. otherwise, it violates Statute of Frauds
and is unenforceable.

In general, contract of sale may enumerate encumbrances and buyer may waive them as they affect
marketability of title.
Lohmeyer v. Bower

Facts. P entered into contract for sale of land with D for a specific lot in subdivision. Abstract of title
showed that original developer of subdivisions had imposed restrictive covenant on lot that any house
built on it had to be a two-story (current house was one-story). After consulting attorney, P found that
house violated zoning ordinance - too close to lot line. P brought zoning violation to Ds attention. Ds
offered to purchase and convey to P additional land to eliminate violation.

Issue.

Is the lot subject to encumbrances or other burdens that make the title unmerchantible?

Encumbrance. A claim, lien, charge, or liability attached to and binding real property.

If so, are they excepted by contract provision that title is "subject to all restrictions and easement
of record that apply to this property?"

Court held Yes and No.

Rule. A marketable title to real estate is one that is free from reasonable doubt. A title is doubtful and
unmarketable if it exposes party holding it to hazard of litigation (an injury).

Example. Homeowner's assoc. could sue for violation of two-story covenant.

Reasoning.

The mere existence of municipal restrictions, like zoning requirements, are not encumbrances on
title that purchaser may cite as making the title unmerchantible, and therefore giving him grounds
for rescission (of contract for sale of land). However, when the property stands in violation of the
municipal restrictions, then its title is unmerchantible under the above rule (purchaser exposed to
threat of litigation).
Johannes de Silentio
Property (Mann)
Fall 1998
Page 29 of 59



A waiver of an encumbrance in contract of sale is not a waiver of a violation of encumbrance
when buyer does not know of violation.
Likewise, violation of restrictive covenant - and not covenant itself - renders title unmerchantible.
In response to Ds argument about time to correct imperfections in title, court reasons that any
corrections D would make would compel P to take something he did not contract to buy.
Specifically, Ds would have to add another floor to house and another two feet to yard (to extend
distance from lot line as required by zoning).
Conklin v. Davi

Facts. Seller’s title grounded in part on adverse possession. Buyers refuse to consummate deal,
seeking rescission, alleging defects in title and misrepresentation by sellers.

Holding. Marketability of property does not depend upon whether its title is perfectly or adversely
held.

Title resting on adverse possession, if clearly established, if marketable.

For this reason, sellers have no valid claim to rescission.

Rule. Failure to perfect title of record does not make a property unmarketable. Adverse possession
does not make title unmarketable.

Reasoning.

While a seller whose title is held in adverse possession may choose to perfect the title before
selling the property, doing so is not required before entering into a contract of sale.

If the seller believes that the adversely held title is marketable, he may enter into contract of sale
hoping to convince purchaser (or court if necessary) that his estimate of the title's marketability is
justified.

This course of action is only permissible where the contract of sale does not require a title valid of
record, but provides for a less stringent requirement like marketability or insurability. Where title
is required to be marketable and insurable, there is no requirement that it be a perfect title of
record.

Insurable interest. A real interest in a property that will a contract to indemnify the person
interested against its loss from being a mere wager policy.

Indemnify. To secure against loss or damage.

Whether contract is rescindable depends on whether it is marketable: type of remedy is immaterial
to this consideration.

In this case, purchaser has shown that record title is outstanding to someone other than seller.
Thus, burden falls to seller to establish title by adverse possession. If seller establishes his
adverse possession of title, then marketability necessarily follows.

Buyer could have sought damages instead, i.e. difference between market price and value of
property on date of breach. (market fluctuations have impact here)
Johannes de Silentio
Property (Mann)
Fall 1998
Page 30 of 59
Duty to Disclosure Defects and Warranties of Quality




At common law, disclosure was minimal, as caveat emptor prevailed.

Caveat emptor means seller has no duty to communicate undisclosed conditions affecting the
premises for sale.
More recently, duty to disclose has been extended to those things that effect marketability.
Duty to disclose is getting broader.
Must disclose material defects that would decrease value of property, which are not discoverable under
normal investigation.
Stambovsky v. Ackley

Facts. P seeks rescission of contract of sale b/c property he purchased is reportedly haunted by ghosts.

Holding. Nondisclosure by D of 'impairment' on value of contract constitutes a material
misrepresentation that creates an exception to caveat emptor.

Rule.

Where fairness and common sense dictate, an exception should be created to rule of caveat
emptor.

Specifically, where:

a condition that has been created by the seller materially impairs the value of the contract, and

is peculiarly within knowledge of seller or

unlikely to be discovered by a prudent purchaser exercising due care w/ respect to subject
transaction,

Nondisclosure constitutes a basis or rescission as a matter of equity.
Johnson v. Davis

seller lies about condition of roof. buyer walks in during rainstorm in transactional period and roof is
leaking.

Rule for Duty to disclose.

Where seller knows of defects materially affecting value of property that are know only to seller,
and knows that such facts are not readily accessible to buyer, seller has a duty to disclose the
defects.

seller of a used house has no liability on an implied warranty of habitability. seller is liable for
misrepresentation and fraud.

to the extent that there are warranties of quality, such that seller is held to them, they only apply to
new houses and not used ones.

Builders of new houses are held to a higher standard - implied warranty for quality of work (where
new houses and builder is seller).
Johannes de Silentio
Property (Mann)
Fall 1998
Page 31 of 59
The Deed and Warranties of Title
a)
Earliest deed. Charter of feoffment.
i) Evidenced the fact and terms of a feoffment.
b) Bargain and sale deed replaced charter of feoffment after livery of seisin was no longer required to
convey legal interest in land.
c) Modern deed.
i) various words of transfer from all deed types merged into one deed.
ii) Many states have short form deeds that eliminate redundancy of words of transfer.
(1) Includes essential elements required for an instrument to be a conveyance:
(a) grantor
(b) grantee
(c) words of grant
(d) description of land involved
(e) signature of grantor
(f) (sometimes acknowledgment - see 602)
iii) Current types of deeds:
(1) General warranty deed
(a) warrants title against all defects in title, whether they rose before or after grantor took
title.
(2) Special warranty deed
(a) contains warranties only against grantor's own acts but not acts of others (i.e., grantor's
predecessors in ownership).
(3) Quitclaim deed
(a) contains no warranties of any kind.
(b) conveys whatever title grantor has, if any.
(c) if grantee takes nothing deed, grantee cannot sue grantor.
d) Notes on Deed. 602 - 606.
i) Consideration.
(1) Customary for deed to state that consideration was paid by grantee. Makes him bona fide
purchaser.
(2) Entitles purchaser to protection of the recording acts against prior unrecorded instruments.
ii) Forgery.
(1) A forged deed is void. Grantor whose signature is forged to a deed prevails over all persons,
including subsequent bona fide purchasers from grantee who do not know deed is forged.
(2) Courts hold that deed procured by fraud is voidable by grantor in action against grantee:
however, subsequent bona fide purchaser from grantee who is unaware of fraud prevails over
grantor.
(a) Grantor made it possible for subsequent purchaser to suffer loss.
(3) Forgery v. fraud. ???
e) Covenants of general warranty deed. See 602.
i) Present covenants.
(1) Broken, if ever, at time deed is delivered.
(2) Statue runs on breach at date of delivery of deed.
(a) Covenant of seisin.
(i) grantor warrants that he owns estate he purports to convey.
(b) Covenant of right to convey.
(i) grantor warrants that he has right to convey property. May or may not be same as
covenant of seisin. Example of exception is trustee - has former but not latter.
(c) Covenant against encumbrances.
(i) grantor warrants that there are no encumbrances on property (e.g., mortgages, liens,
easements, and covenants).
ii) Future covenants.
(1) Broken when grantee or his successor is evicted from property, buys up paramount claim, or
is otherwise damaged.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 32 of 59
(2) Statute runs from time of eviction, or when covenant is broken in future.
(a) Covenant of general warranty.
(i) grantor warrants he will defend against lawful claims and will compensate grantee
for any loss grantee may sustain by assertion of superior title.
(b) Covenant of quiet enjoyment.
(i) grantor warrants that grantee will not be disturbed in possession and enjoyment of
property by assertion of superior title.
(ii) Identical with covenant of general warranty (therefore often omitted).
(c) Covenant of further assurances.
(i) grantor promises that he will execute any other documents required to perfect the
title conveyed.
Brown v. Lober

Covenant of seisin was broken b/c of previous claim to 2/3 interest in mineral rights.

Browns are suing for breach of future covenant of quiet enjoyment b/c statute has run on present
covenant of seisin. Thus, Browns argue constructive eviction.

That doesn't happen until someone comes in and tries to mine minerals, which hasn't happened. Then
Browns have cause of action under covenant of quiet enjoyment against Bosts.

What remedies to Browns have?

could try and sell mineral rights for lower price.

At end of case, Browns have to wait until breach of quiet enjoyment to sue Bosts, which makes it even
more difficult to bring suit b/c their estate will be closed (they are dead). Browns had last clear chance
to prevent loss.

Brown's should have conducted title search, or gotten title insurance - insured would have done title
search. Since they didn't, they are out of luck.

If they had started mining b/f discovering title defect, could have claimed adverse possession and
conducted quiet title action.
Frimberger v. Anzelloti

Issue. Should an alleged latent violation of a land use statute, which exists on land at time title is
conveyed, constitute an encumbrance that breaches grantor's covenant against encumbrances (a present
covenant of general warranty deed)?

Present covenants cannot be breached unless it existed at time of conveyance.

Rule.

A claim for breach of warranty against encumbrances cannot be predicated on the necessity to
repair or alter the property in question to conform to land use regulations. For the purpose of a
deed warranty, a latent violation of state land use regulations does not constitute an encumbrance
where:

it does not appear on land records,

it is unknown to seller of property,

the enforcing agency has taken no official action to compel compliance at time deed was
executed, and

it has not ripened into an interest that can be recorded on land records.

Reasoning.

Regarding breach of covenant against encumbrances.

For an encumbrance to render a title unmarketable, defect must present a real and substantial
probability of litigation or loss at the time of the conveyance.

State Department of Environmental Protection did not bring any action against P to compel
compliance with the statute: P was never required by DEP to abate the violation or to restore
the wetlands.

Since P never actually filed application to keep bulkhead and fill, any damages he claimed
were speculative.

Since the violation only occurred upon P's filing a request with DEP, no litigation was
imminent on the statutory violation.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 33 of 59


Rather than include such violations as encumbrances within the covenants of a warranty deed
(and thereby create uncertainty in law of conveyances), parties to conveyance of real property
can protect themselves from such conditions by including protect language in the contract.
Regarding finding of innocent misrepresentation. Elements:

representation of material fact

made for purpose of inducing purchase

representation is untrue

there is justifiable reliance by P on representation by D
Mann's Comparison of Frimberger to Lohmeyer

Land use statute is more like building ordinance than zoning ordinance.

Land Use and Building do not present real and substantial threat of litigation that threatens
marketability of title b/c they do not present violation of covenant against encumbrances.

Key difference. What is bearing on decisions that violations in Lohmeyer occurred during
executory period of conveyance (between preparation of contract of sale and closing), and
Frimberger violations were discovered two years after closing?

Violation of any type of land use regulation will not constitute an encumbrance that would
violate covenant.

When encumbrance is discovered during executory period and affects marketability of title,
then buyer has rescission of contract. Seller has to figure out what to do.

As an efficiency matter, violations that impair marketability of title do not necessarily breach
title covenant against encumbrances. Puts premium on buyers to make certain what they are
getting (get good physical inspections, do thorough title search).

Policy reasons for treating/not treating building codes as encumbrances.

Depends on where you want to put burden of assurance that house is appropriate for sale. If all
houses are required to be up to code before selling, this will be very expensive for potential sellers.

Generally, sellers of existing houses are not warrantors of building codes. This does not affect
duty to disclose violations of warranties of quality.
Rockafellor v. Gray

Minority view. Chose in action assignable.

Chose in action. A right of bringing an action or right to recover a debt or money.

Facts. Doffing convey to Rockafellor with outstanding mortgage. Sheriff deed to Connelly. C convey
to Dixon with general warranty. Dixon to H&G with special warranty. H&G sue Connelly b/c he
conveyed by general warranty deed.

Rule.

Minority rule.

Covenant of seisin runs with land, and is broken the instant the conveyance is delivered. It then
becomes a chose in action held by the covenantee in deed. Chose in action transferred by
assignment: deed by first covenantee operates as an assignment of such in action to remote
grantee, who can maintain an action thereon against grantor in original deed.

Discussion of Rule.

A majority of American jurisdictions bar assignment of causes of action. So, in most
jurisdictions, Hansen and Gregerson could not have sued Connelly on Dixon's cause of
action.

Minority view may discourage use of general warranty deeds.

Counterpoint. If choses in action were not assignable, you could not sell overdue
accounts.

The rights of the remote grantee are acquired by conveyance (assignment) and not by
virtue of actual possession of the premises.

A remote grantee may recover the amount of consideration between the original grantor
and grantee, plus interest running from the date on which it was conveyed the property
from an intermediate grantor.

Measure of damages for remote grantee equals damages that original grantee could have
recovered against grantor.
Johannes de Silentio
Property (Mann)
Fall 1998



Page 34 of 59
Reasoning.

breach of present covenant of seisin becomes chose of action that is assignable

liability for breaches of title covenants will be limited by the consideration received by the person
who made covenant in first place or by actual damages sustained, whichever is less.

That's why Connelly is on hook for $4000 instead of $7000.

Person being sued is not insurer for increased value of land.

Keeps person from getting more than they paid for land in damages.

Insulates people like Connelly from being liable for rise in market that is result of rapid
speculative activity.

designed to avoid rewarding speculators who were not using land productively, but selling
and reselling land as commodity for profit.

running interest from date of most recent intermediate grantor mitigates damages original
grantor must pay.

recited consideration is evidentiary basis for determining damages in cases involving remote
parties.
Policy.

Reliance on recited consideration promotes land record system. Parol proof is only allowed in suit
between the original parties. Reliance of recited consideration comes from centrality of land
records and desire to promote their integrity.
Discussion.

Why didn't Hansen and Gregerson sue Dixon?

Dixon never promised covenant of seisin - transfer by special warranty deed (done nothing to
repair title, but did nothing to harm title). Connelly transferred to Dixon by general warranty
deed, which includes all covenants - including covenant of seisin.

Connelly is only one on hook for Hansen and Gregerson. By virtue of Dixon's special
warranty deed, he is out of picture.

We know why they sued Connelly, how could they sue him? See rule. H&G are suing on Dixon's
cause of action as assigned to them.

Dixon can not recover b/c he did not rely on Connelly for anything. Connelly would have been
okay if he had. Remote grantees have greater right than immediate grantees b/c they rely more on
title of record.

H&G did not sue Connelly for breach of future covenant b/c future covenants take as starting point
for breach the eviction from possession. No possession, no eviction. Connelly never had
possession.

Problem 2, CB 620. In problems like this, keep track of chose of action.
Sweeney, Administratrix v. Sweeney

Oral condition (here, attestation clause) void.
1) Facts.
a) Plaintiff is intestate of Maurice, his wife. Defendant is John, Maurice's brother.
b) Maurice deeded farm to John: this deed was recorded.
c) John deeded property back to Maurice: this deed is unrecorded.
i) Purpose of second deed was to protect Maurice in case John died. Maurice died first.
d) John kept both deeds.
e) Plaintiff filed suit to get John to honor the second deed. Under state law, she would get all
Maurice's land b/c Maurice died intestate.
2) Holding.
a) The second deed was delivered to Maurice.
b) Oral condition claimed to be attached to delivery of second deed was not operative (here,
attestation clause - that deed was only operative if John died first).
3) Rule
a) To be effective, delivery must be made with the intent to pass title. Where deeds are formally
executed and delivered, the presumption that grantee assented to them can be overcome only by
evidence that no delivery was in fact intended.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 35 of 59
b) A conditional delivery is and can only be made by placing deed in hands of third person, to be
kept by him until happening of event upon which deed is to be delivered over to grantee. A
conditional delivery to a grantee vests absolute title in grantee.
4) Reasoning.
a) Since the deed was delivered to Maurice, the execution of the attestation clause was p/f proof that
deed was delivered.
b) There is rebuttable presumption that grantee assented since deed was beneficial to him.
c) The only purpose in making deed expressed by either party was Maurice's statement that it was to
protect him in case John died b/f him.
i) This purpose would have been defeated had there been no delivery with intent to pass title:
therefore, legal delivery is conclusively established.
Rosengrant v. Rosengrant

Facts.
a) Jay is nephew of Mildred and Harold.
b) Harold and Mildred obtained deed for their farm from banker, who had prepared it according to
their instructions.
i) Signed deed and said they were going to give Jay the place, but they wanted Jay to leave deed
at bank. When they died, he was to take and record it (at courthouse), thereby gaining
possession of the title.
(1) Jay met these conditions.
c) A petition was filed to cancel and set aside deed, which alleged that it was void b/c
i) it was never legally delivered, and
ii) since it was operative only upon recordation after death of grantors, it was a testamentary
instrument and was void for failure to comply with Statute of Wills.

Holding.

An unrecorded deed placed in custody of a third party is intended to be a will (instrument for a
trust or for a testamentary purpose), and not a valid conveyance to a named grantee at that time.

Rule. Grantor's donative intent at time deed was delivered is the controlling factor in determining
whether the instrument was a deed or an inter vivos transfer of land or a transfer at death.

A grantor has established a will, or transfer at death, where he:

delivers a deed under which he reserves a right or retrieval,

attaches to that delivery condition that deed is to become operative only after death of
grantors, and

further continues to use property as if no transfer had occurred.

Reasoning.
a) Writing on envelope in which deed was placed - and kept by banker - establishes that deed was
retrievable at any time by Harold b/f his death. Envelope said "J. Rosengrant or Harold
Rosengrant."
b) De facto life estate. Harold continued to use and to pay taxes on deed property until his death, and
claimed it as homestead: therefore, grantors did not deliver deed to Jay at they met with him and
banker.
c) There was an implied, if not express, agreement between banker and Harold that grant was not to
take effect until two conditions occurred;
i) death of both grantors (Harold and Mildred), and
ii) recording of deed at courthouse.
d) The ritualistic delivery of deed to Jay and return to banker was a pro forma attempt to comply with
legal aspects of delivery: this was just a symbolic gesture.

A valid in praesenti conveyance requires 2 things:

actual or constructive delivery of the deed to the grantee or a 3 rd party OR

an intention by the grantor to divest himself of the conveyed interest.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 36 of 59
Mortgage















Driving force behind law of mortgages is that lender is a secured lender, i.e. hold property interest.
Why used. Most people do not have cash available to pay for the real property they are purchasing. If
the borrower is an acceptable credit risk, the lender will lend money to the borrower, to be paid back
with interest over time. To secure the debt owed the lender, the borrower will give the lender a
mortgage on the property. If the debt is not paid, the lender will “foreclose the mortgage.”
Foreclosing the mortgage means that the property will be sold, and from the proceeds the lender will
be paid the amount of the debt and anything left will be given to the borrower.
History. Lender insisted that the borrower deed the land in fee simple to the lender, subject to a
condition subsequent: if the loan was repaid on the agreed date, the lender would reconvey the fee
simple to the borrower or the deed would become void.
Maximum is 90% for first mortgage (bank want to protect itself in case mkt value of house drops); the
more money buyer puts in, the lower interest rates that banks will give because lower risk to bear
When interest rates low, lenders competing with one another, many people want to borrow
When interest rates high, lenders less competitive b/c need higher income level to qualify for loan
Consists of two documents:

Note. document that evidences the debt, a personal obligation of the borrower

Mortgage. Agreement that the land will be sold if the debt is not paid, and the lender reimbursed
from the proceeds of the sale; gives the lender security; ordinarily recorded in the county
courthouse at the time it is given, which recordation will give the lender priority over subsequent
purchasers of the land
Four variables

amt of down payment

length of mortgage

interest rate

rate of amortization
Terms

Mortgagor. borrower or debtor, the buyer of the land

Mortgagee. Lender

Equity. borrower’s interest in the land, down payment

Deficiency judgment. if, on the foreclosure sale, the land does not bring enough to pay the debt,
the lender can sue the borrower on the note for the deficiency

many states have anti-deficiency statutes that make lenders choose b/n foreclosure or going
against borrower personally- usually choose foreclosure b/c default means they have nothing
personal to go after
Balloon payment mortgage.

calls for periodic interest payments until the due date of the debt, when the whole principal sum
must be paid at once, usually just get another mortgage
Amortized payment mortgage.

Mortgage for 25-30 years with even monthly payments over the period; the last monthly payment,
in the same amount as the earlier ones, pays off the mortgage
Mortgages are now self-amortizing: part of each payment is allotted to reducing the principal sum due,
another part pays the interest due on the sum. In the early years of the note, most of the payment is
allotted to interest, but as time goes on, more of the payment is allotted to principal.
Second mortgage.

a mortgage given second in time, with notice of the earlier mortgage; second mortgagee’s rights
are subject to the rights of the first mortgagee; second mortgages are riskier than first mortgages
and command a higher interest rate
Deed of trust.

In many states, the mortgage takes the form of a deed of trust. Instead of the borrower giving the
lender a mortgage, the borrower gives the lender a deed of trust. By this arrangement the
borrower transfers title to a third person as trustee for the lender to secure the debt. If the debt is
not paid, the trustee sells the land under a power of sale in the trust deed, pays off the debt, and
pays over anything left to the borrower.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 37 of 59


Under the deed of trust, upon default by the buyer and request by the lender, the trustee can sell
the land at a public sale without going to court and the lender can bid at the trustee’s sale.
Installment land contract.

Agreement by the buyer to buy land and to pay for it over a period of years. In the contract, the
seller agrees to deliver title at the end of the period. The buyer goes into possession and the seller
keeps title until the final payment.

Keeping title is the seller’s security.

Since the installment land contract functions as a mortgage, courts increasingly extend the
traditional rights of mortgagor to the buyer under an installment land contract.

Different from mortgage because it is the seller who provides the financing.

usually used in low income property and vacation houses (usually no access to mortgage)

set up to allow seller quick foreclosure
Bean v. Walker

Facts. P and D with installment land contract, buyers paid almost half of principal then defaulted.
Sellers with suit in ejectment.

Ejectment. Action to restore possession of property to person entitled to it. P must establish right
to possession in himself, and must show that D is in wrongful possession.

Holding. A defaulting vendee has same rights as a mortgagor at common law (grounded in equitable
title).

Qualification. Court does not suggest that forfeiture would be an inappropriate result in all
instances involving breach of a land contract. If vendee abandons property and absconds (flees),
or vendee pays minimal sum on contract and, upon default, seeks to retain possession while
vendor pays upkeep (takes, insurance, etc.), equity will not intervene.

Rule. Where sale of real property is evidenced by contract only and purchase price has not been paid and is not be paid until some future date specified in terms of agreement - parties occupy substantially
position of mortgagor and mortgagee at common law.

Vendee has equitable title and vendor retains legal title in trust for vendee, subject to vendor's
equitable lien for payment of purchase price in accordance with contract terms.

Therefore, under a land sale contract, a vendee acquires an equitable interest in property that must
be extinguished b/f vendor may resume possession: vendor cannot make ejectment action.

Reasoning.

Ct finds that equitable conversion takes place at signing of contract, so during executory period,
buyers have equitable interest in property.

Buyer bears risk of loss (if house burns down during executory period). Treats buyer as owner of
property even though legal title does not vest until contract terms are satisfied (at closing).

Since buyer’s have equitable title, sellers cannot use an action in ejectment to resume possession.

Seller’s must follow foreclosure procedure.
Transfer of the mortgagor’s interest

sale subject to mortgage: the new buyer takes the land subject to the lien upon it, but the new buyer is
not personally liable on the debt. If the debt is not paid, the mortgagee can foreclose on the land, but
the mortgagee cannot sue the new buyer on the debt.

sale with assumption of the mortgage: the new buyer becomes personally liable on the debt. The
mortgagee can sue either the new buyer or the original mortgagor on the debt (as between them, the
new buyer is primarily liable)
Default by Mortgagor

Upon default, the mortgagee can sue on the debt or foreclose on the mortgage. The mortgagee can get
a deficiency judgment against the mortgagor on the difference between the amount of the debt and the
amount realized from the sale.

Legislation. To protect the mortgagor in default, legislatures in some states have enacted various
legislation.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 38 of 59


fair market value limitations: statute may provide that the mortgagee can get a deficiency
judgment only for the difference between the debt and the judicially determined fair market value
of the property at foreclosure.

anti-deficiency judgment: a few states have legislation prohibiting the mortgagee from getting a
deficiency judgment on purchase money mortgages.

statutory right of redemption: the mortgagor can in some states stay in possession until the
redemption period has expired.
Judicial decisions. Mere inadequacy of the foreclosure sale price will not invalidate a sale, absent
fraud, unfairness or other irregularity. But courts have set aside foreclosure sales for inadequacy of
price where the price is so low as to shock the judicial conscience. They may scrutinize the sale to
make certain the proper notice was given and other safeguards complied with. And where other
factors are present, such as chilled bidding, unusual hour of sale or other indications of unfairness,
courts do set sales aside. Or the court may hold that a private foreclosure sale must use commercially
reasonable methods for producing a fair price.
Murphy v. Financial Development Corp.

Facts.

Substantive

Refinanced based on appraisal of $46,000 with Financial Development Corp. Note and
mortgage were later assigned to Colonial Deposit Co.

Foreclosed base on fair market value of $54,000.

Initial offer at foreclosure sale was for $27,000 by lender (only bidder to show up).

A few hours after by property they foreclosed on, took turnaround bid of $27,000 (from
representative another D in present action, Southern, Inc.). Countered with offer to sell at
$40,000. Sold at $37,000.

Procedural

At trial court took recommendation of a Master, who concluded that lenders failed to exercise
both good faith and due diligence in obtaining a fair price for the property. Entered judgment
for Ps.

Damages award was difference of fair market value of property on date of foreclosure and
price of property obtained at foreclosure sale.

$54,000 - $27,000 = $19,000

Also, awarded attorney's fees.

Also ruled that Southern was bona fide purchaser - this issue is not on review.

Holding. A mortgage executing a power of sale is bound by both statutory procedural requirements
and by the exercise of good faith and due diligence.

Rule. Mortgagee executing power of sale is bound both by statutory provisions and by duty to protect
interests of mortgagor through exercise of good faith and diligence.

Reasoning/Discussion.

Mortgagee has dual role as seller and potential buyer at a foreclosure sale.

In its role as a seller, mortgagee has a fiduciary duty of good faith and due diligence.
Therefore, must exert every reasonable effort obtain a fair and reasonable price for the
property.

If necessary, must adjourn a sale or establish 'upset price below which it will not accept any
offer.

What mortgagee must do to fulfill fiduciary obligation as seller depends upon circumstances
of each individual sale.

Inadequacy of sale price alone is not sufficient to demonstrate bad faith unless price is so low
that is 'shocks the judicial conscience'.

Duties of good faith and due diligence are distinct.

Bad faith is defined as an intentional disregard of duty or a purpose to injure.

No bad faith.

Evidence indicates that lenders complied with statutory requirements, postponed sale to give
mortgagor chance to make defaulted payment, and that they did not intend to injure mortgagor
by, for example, discouraging other buyers.

No due diligence.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 39 of 59



Lenders failed to exercise due diligence in obtaining a fair price: a reasonable man in lender's
position would have adjourned the sale b/f taking accepting offer that lender's did.
Damages/Duty Discussion.

At foreclosure sale, lenders were only bidders. Their bid of $27,000 was 'sufficient to cover all
monies due…but did not provide for a return of any of Ps' equity'.

Reasonable person in place of lender would have realized Ps' equity in property was $19,000 difference between 1980 appraised value of $46,000 and $27,000 owed on mortgage .

Lenders had reason to know that they stood to make substantial profit on quick turnaround sale.

Offered property for sale at price much higher than what they paid just hours earlier: they had to
know they could make profit on quick turnaround sale.

In this case, lenders had obligation to secure a portion of mortgagor's equity: this is outcome of
lender's fiduciary duty as seller. Reasons supporting this conclusion:

substantial equity in property

lender's knowledge of appraisal value of property

Ps' efforts to forestall foreclosure by paying mortgage arrearage b/f sale

To fulfill fiduciary duty, lenders could have:

established upset price to assure minimum bid;

postponed auction; and

advertised commercially to assure other bidders would be present.

B/c they did not take any of these actions, it is clear lenders were only out to make themselves
'whole': this typifies their breach of fiduciary duty.

Although they met statutory requirements of notice of foreclosure sale, this did not demonstrate
due diligence. Very clear these efforts were ineffective in getting attention of other buyers: no one
else showed up.

Comment to § 3-508 of Uniform Land Transactions Act

Sale must be conducted in reasonable manner. Unlikely that advertisement in legal
publication, along with other legal notices, would qualify as commercially reasonable method
of sale advertising.

Advertisement in real estate section of daily paper is example of commercially reasonable
method of sale advertising.
Damages.

For bad faith, damages based on fair market value - which is in excess of fair price - will induce
mortgagees to perform duties properly.

In case, like present, where mortgagee fails to exercise due diligence, proper damages are:

difference between fair price for property and price obtained at foreclosure sale

Here, that would be $46,000 (1980 appraisal value) less $27,000.

Moreover, since there was no bad faith, attorney's fees are not appropriate damages award.

Where due diligence is lacking, test is not fair market value.

Rejected measure of damages as difference between fair mkt value and price obtained at sale
b/c lender did not exercise bad faith. Ct accept measure of damages as difference between
fair value and price at foreclosure sale. Fair mkt value generally higher than fair value. Fair
value hard to determine, no set formula.
Mann's Discussion of Equity in Murphy

Equity. Portion of house that is yours, free and clear of anyone else.

So for Murphys, at time they refinanced in 1980, their equity in house had increased. As principal
decreases (came bigger party of monthly payments), so does lender's interest in house.

Ways to increase equity in home: pay off loan, or value of home increases from purchase price.

Refinancing takes them back to start of payments, and increases amount of monthly payments.
Refinancing allows them to make increased payments. Need more than appraisal to get refinancing.

Foreclosure sale 1981. One bidder, the agent for lender to whom Murphy's had defaulted. Why would
lender be only buyer there? State of title may be shaky, or people may think so (off-record risks). See
Rockafeller. Also foreclosure sale ads in papers are small with minimal information. Buyers don't
have time to 'kick the tires'. If defaulting owner is around, may not encourage buyers anyway.

Lender can buy as a book transaction: offer to buy at amount of loan outstanding. Other buyers would
have to pay cash (another reason why buyers are discouraged).
Johannes de Silentio
Property (Mann)
Fall 1998



Page 40 of 59
When they sue, they ask for either return of home or money damages. Can't get first option, b/c
Southern holds rightful title to property.

Southern was a good faith purchaser: you don't want punish them, b/c that would effect ability to
sale foreclosed property.

Although foreclosure sale may have been unfairly conducted, Southern did not participate in
that sale. Bought it from lender after sale, which means they had no knowledge of equity
interests of Murphys in that property.

Since they did not know of the interest, they did not participate in lender's wrongful violation
of Murphys equity interests.
There are sale defects that void a foreclosure sale, and defects that may render a sale voidable: what
happened here was latter.
Four elements of mortgage loan monthly payments:

principal and interest,

(property) taxes and insurance (not homeowners, but fire or any other type against destruction of
property; 'loss insurance'). These are adjusted annually over lifetime of loan. So, monthly
payment amount may change on this.

Standard home loan in 1966 was fixed rate, self amortizing, 30-year loan.

Under amortizing loan, ratio of interest amount to principal amount changes over time. At first,
you are paying much more interest than principal: at end, the opposite is true. Frontloading
interest. Fixed rat mortgage.
Equitable Conversion

Invented to treat buyer as having title for certain purposes prior to date set for closing

Doctrine. Equity regards as done that which ought to be done: buyer is regarded in equity as the owner
of the land and seller has security interest for payment of the purchase price

Right to possession. Although buyer has equitable title, she does not have right to possession which
follows legal title. The contract may put the buyer into possession.

Equitable conversion does not take place if title is unmarketable
Risk of loss

Majority. buyer has risk of loss b/c equitable conversion (buyer owns land, seller has security
interest), seller can sue for specific performance at contract price or sue for damages, which equal loss
in value to property. American courts require seller to credit insurance proceeds against purchase
price. Sellers holds insurance proceeds in constructive trust.

Minority. seller has risk of loss (MA rule), reject equitable conversion

imply in contract that if the loss is substantial and terms of agreement show that building constituted an
important part of the subject matter of the contract, the contract is not binding and buyer can recover
earnest money

Party in possession has risk of loss
Johannes de Silentio
Property (Mann)
Fall 1998
Page 41 of 59
Recording

In General

recordation is not essential to the validity of a deed as between the grantor and grantee

If a person does not record, he leaves in her grantor (and grantor’s heirs and devisees) the power to
defeat the deed by executing a subsequent deed in favor of a bona fide purchaser.

basic issue is determining the chain of title
Functions of the recording system:

gives constructive notice to the whole world, ensures interest in property is given priority over
subsequent purchasers from the same seller

establishes a system of public recordation of land titles

preserves in a secure place important documents

any kind of deed, mortgage, lease, option, or other instrument creating or affecting an interest in land
can be recorded

protects purchasers for value and lien creditors against prior unrecorded interests

Note: recordation does not protect against prior instruments that have arisen by operation of law (title
by adverse possession, prescriptive and implied easements) b/c statute only applies to unrecorded
conveyances
Defects in Recording System

public records contain incomplete information: even with good record title, a person can be defeated as
a result of defect of fact or law not ascertainable from recorded documents, i.e. forged deed, faulty
acknowledgment, etc.

public records are inefficiently organized

expense
Indexing




recorder indexes the deed by entering a notation in the index book showing in which deed book the
deed can be found reproduced in full
Two types of indexes

tract index (system used everywhere off east coast)

documents are indexed by block and lot number assigned to the particular tract (land must be
surveyed)

every interest affecting each tract is recorded in the index

grantor-grantee index

grantor: use to search forward, all instruments indexed alphabetically and chronologically

grantee: use to search backwards to find the preceding source of title (grantor)

separate grantor and grantee indexes for each type of instrument (mortgages, deeds, wills,
etc.)
Occasionally, the clerk in the recorder’s office fails to index instrument properly. Two views emerge:

grantee is protected b/c she did everything she reasonably could be expected to do to give notice to
the world of her interest

subsequent purchaser is protected b/c only a properly indexed instrument imparts sufficient
constructive notice to a subsequent purchaser (more practical b/c instrument cannot be located
until properly filed and indexed)
Grantor-grantee index search:

look in grantee index to discover from whom each previous owner took title

starting from seller, go backward in time to the “root of the title” and establish chain of title

run grantor index forward under the first owner’s name from time of execution of first deed giving
title to such owner, to time of recording of first deed out from such owner

determines whether any of the previous owners conveyed an interest in the property before
conveying the fee simple to the next owner

go to the books and look at the actual deed for each transfer
Johannes de Silentio
Property (Mann)
Fall 1998
Page 42 of 59
Statutes for Recording

Race statute

as between successive purchasers of the same land, priority is determined solely by who records
first

whether a subsequent purchaser has actual knowledge of the prior purchaser’s claim is irrelevant

protects a subsequent purchaser only if the subsequent purchaser records first

Ex: O conveys to A. A does not record. O conveys to B. B has actual knowledge of A’s deed. B
records. A records. B prevails.

Notice statute

a subsequent bona fide purchaser prevails against prior unrecorded instruments if he has no
actual/constructive notice of a prior claim at the time of the conveyance, even though the
subsequent purchaser fails to record.

Ex: O conveys to A. A does not record. O conveys to B, who gives valuable consideration and
has no notice of deed to A. A records. B records. B prevails.

Race-Notice statute

a subsequent purchaser is protected against prior unrecorded instrument’s only if the subsequent
purchaser 1) is without actual/constructive notice of the prior instrument and 2) records before the
prior instrument is recorded.

Ex: O conveys to A. A does not record. O conveys to B, a bona fide purchaser. A records. B
records. A prevails b/c B’s conveyance was not first recorded.

notice and race-notice statutes only protect bona fide purchasers: 1) person must be a purchaser, 2)
who takes without notice, and 3) gives a valuable consideration

without notice: purchaser had no actual, record, or inquiry notice of the prior claim at the time he paid
consideration and received his interest in the land

priority issues very important
Shelter Rule
A person who takes from a BFP will prevail over any interest over which the BFP would have prevailed.
This is true even where such person had actual knowledge of the prior unrecorded interest.
Rationale: gives BFP the value of his bargain, which includes right to convey, devise his interest
Ex: O conveys to A who does not record. O conveys to B, a bona fide purchaser, who records. B
then conveys to C, who has actual knowledge of the O to A deed. Inasmuch as B prevails over A,
B’s assignee, C, prevails over A. C is “sheltered” by the BFP.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 43 of 59
Chain of Title




Period of time for which records must be searched and the documents which must be examined within
that time period
Recorded sequence of transactions by which title passed from a sovereign to present claimant.
Includes the series of recorded documents that give constructive notice to a subsequent purchaser.
Purchaser is charged with notice of property conveyances by her grantor recorded AFTER her grantor
acquired land from his predecessor and recorded title, and BEFORE a deed is recorded conveying title
from that grantor to another.
Problems arise where grantor and grantee indexes are used
Deeds from common grantor of adjacent lots

Does a deed by a subdivider to another lot in a subdivision give constructive notice of any covenants or
easements reserved over the neighboring lots? The courts are split:

Some hold that because the burden of title search would be excessive, deeds out to other lots from the
common grantor are not in B’s chain of title, and B is not bound by them.

Others charge B with reading all deeds out from the common grantor, not just deeds to his particular
tract. B has constructive notice and is bound by the restriction.
Guillette v. Daly Dry Wall

Gilmore convey to Guillettes with restriction to single family use for all lots still owned by Gilmore.
Gilmore convey to others without restriction on lots retained by seller. Gilmore convey to DDW with
no restriction. In effect, Gilmore gave Guillettes an interest in other lots through the restrictions.
Court uses expansive defn of chain of title to protect property holders. Court expands title search to
include all deeds from the common grantor as a remedy; decision to place burden on one party
instead of mass (people who bought into the development for its image).

Rule. Where the grantor binds his remaining land by writing, reciprocity of restriction between the
grantor and grantee can be enforced; in such cases, a subsequent purchaser from the common grantor
acquired title subject to the restrictions in the deed to the earlier purchaser.
Requirements for Recordation

Recording Unacknowledged Instrument

Majority rule: when the defect does not appear on the face of the acknowledgment, the deed imparts
constructive notice, but if the defect is patent, the deed does not give constructive notice.

Other authority: If an instrument is defectively acknowledged, it is not entitled to be recorded and
hence cannot impart constructive notice. It has even been held under race-notice, if an instrument in
the chain of title bears a defective acknowledgment, no later instrument in the chain can be deemed
properly recorded so as to defeat a prior unrecorded claim.

If defect is patent, deed does not give constructive notice. But, purchaser then has actual notice, or at
least inquiry notice, to investigate the deed.

Example: O conveys to A, who does not record. O subsequently conveys to B, who has no notice
of A’s deed and gives valuable consideration. B’s deed is entered into the records, but it has
defective acknowledgment. B conveys to C, who has no notice of A’s deed, gives valuable
consideration, and records his deed. B’s deed is not “recorded” and therefore C is not a
“subsequent purchaser in good faith… whose conveyance… first is recorded.” A prevails.

Criticism: for the recording system to work efficiently, purchaser should be able to rely on what
appears to be a perfectly recorded instrument.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 44 of 59
Failure to Index
Mother Hubbard Clauses

Conveys interest in real estate and describes property to be conveyed as “all grantor’s property in
certain county”

Mother hubbard clause is valid and enforceable as between the parties to the instrument, BUT such
transfer is not effective as to subsequent purchasers unless they have actual knowledge of the transfer.

Mother hubbard clauses do not constitute constructive notice to subsequent purchasers: in the
grantor index, deed will not be indexed as affecting all such land covered under the clause

Rationale: it is an undue burden to require a title searcher to read all conveyances of other lots
by an owner of the subject lot to see whether the conveyances affect the subject lot
Luthi v. Evans

Owens assigned to Tours an oil and gas lease with mother hubbard clause, including Kufahl lease.
Owens then made a second assignment of her interest in the Kufahl lease to Burris. Issue is whether
recording of an instrument that uses a mother hubbard clause constitutes constructive notice. Court
holds that clause does not impart constructive notice. Court does not impose additional search burden
on Burris b/c Tours could have filed record for each separate interest which would give sufficient
notice.

Mother hubbard clauses typically used when boundaries are imprecise and it is important to get as
much of the overlying property as possible. Guards against possibility that what was owned and what
was described in deed do not match perfectly. But, in this case, the deeds in question describe things
far apart— not the typical use of mother hubbard clause.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 45 of 59
NUISANCE




Nontrespassory interference with person's use and enjoyment of land.
Three basic ways to control land use:

Tort system - Nuisance

Private contract - easements, covenants, servitude;

Government - zoning
Private nuisance

Every person should use his own property as not to injure that of another

Types

Nuisance per se or at law

An act, occupation, or structure which is a nuisance at all times and under any
circumstances, regardless of location or surroundings; oil refinery is a lawful enterprise
and does not represent nuisance per se

Nuisance per accidens or in fact

Becomes nuisances by reason of their location, or by reason of the manner in which they
are constructed, maintained or operated

a private nuisance per accidens or in fact may be created or maintained without
negligence; negligence and nuisance are distinct field of tort liability; two torts may
coexist and be practically inseparable
Nuisance Principles

private nuisance is a field of tort liability rather than a single type of tortious conduct

the feature which gives unity to this field of tort liability is the interest invaded, namely, the
interest in the use and enjoyment of land

any substantial nontrespassory invasion of another's interest in the private use and enjoyment of
land by any type of liability forming conduct is a private nuisance

the invasion which subjects a person to liability for private nuisance may be either intentional or
unintentional

a person is subject to liability for an intentional invasion when his conduct is unreasonable under
the circumstances of the particular case

a person is subject to liability for an unintentional invasion when his conduct is negligent, reckless
or ultrahazardous
Morgan v. High Penn Oil

Facts

High Penn refinery emitted nauseating odors invading P's land.

Amount sufficient to render persons of ordinary sensitiveness uncomfortable and sick.

Holding.

By operating refinery, D intentionally and unreasonably caused noxious gases and odors to escape
onto Ps land.

The invasion of the gas was sufficient to impair substantially Ps use and enjoyment of land.

Rule.

Private nuisance can be intentional or unintentional.

In private nuisance law, an invasion of another's interest in the use and enjoyment of land is
intentional when

person whose conduct is potential basis for liability acts for the purpose of causing it, OR

knows that it is resulting from his conduct, OR

knows that it is substantially certain to result from his conduct

Reasoning.

Standard of unreasonable interference is measure by sensibilities of average person.

Evidence establishes existence of actionable private nuisance, entitling the plaintiffs to recover
temporary damages from the High Penn Oil Co.

Discussion.

Does injunction interfere with High Penn's enjoyment of land? Should A be allowed to harm B or
should B be allowed to harm A?
Johannes de Silentio
Property (Mann)
Fall 1998


Page 46 of 59
Cost-benefit analysis determines cheapest cost avoider.
If cost of clean up is cheaper than harm to P, D has incentive to remedy nuisance and lift
injunction. Settlement likely to follow.

Two questions.

Cheapest way to avoid nuisance?

Who should bear the cost?
Boomer v. Atlantic Cement Co.

Injunction conditional on payment of damages

Facts.

Action for injunction and damages by neighboring land owners alleging injury to property from
dirt, smoke and vibration emanating from large cement plant.

Temporary damages have been allowed, but injunction has been denied.

Result of Special Term and Appellate Division is a departure from the settled rule

Nuisance will be enjoined although a marked disparity is shown in economic consequence
between the effect of the injunction and the effect of the nuisance; but court agrees that to
follow rule and shut down plant would be a drastic remedy.

Alternative is to grant injunction conditioned on payment of permanent damages.

Would compensate Ps for total economic loss to property present and future.

Disposition. Injunction granted, which shall be vacated upon payment by D of permanent damages to
P (amount fixed by court).

Discussion.

Conditional grant of injunction is practical equivalent of denying plaintiff's injunction.

Implicit statement that injunction will be bought off for permanent damages. Licensing of illegal
conduct.

Cost Benefit Analysis.

Will permanent damages put company out of business? Costs to company are measured in
revenues and social cost of shutting down operation - 300 jobs lost, rippling effect, loss of
income and wage tax, consumer nosedive.

Pollution cases analogous to implied warranty of habitability. Judicial recourse serves as a
backstop.
 In effect, balancing inequities one engages in same analysis undertaken to determine whether or
not there was a nuisance in the first place.

Questionable assumption: no transaction costs
Spur Industries, Inc. v. Del E. Webb Development Co.

Coming to the nuisance.

Facts. Residential development comes within distance of cattle feedlot.

Holding.

As to the citizens of Sun City, the operation of Spur's feedlot was both a public and a private
nuisance.

They could have successfully maintained an action to abate the nuisance.

Del Webb, having shown a special injury from public nuisance in the loss of sales, had standing to
bring suit to enjoin the nuisance.

Rule. Public nuisance statute.

Condition or place in populous areas which constitutes a breeding place for flies, rodents,
mosquitoes and other insects which are capable of carrying and transmitting disease causing
organisms.

A business which is not a per se public nuisance may become such by being carried on at a place
where the health, comfort or inconvenience of a populous neighborhood is affected.

Holding 2. Del Webb must indemnify Spur.

Having brought people to the nuisance to the foreseeable detriment of Spur, Webb must indemnify
Spur for a reasonable amount of the cost of moving or shutting down. Relief to Spur is limited to
a case where a developer has, with foreseeability, brought into a previously agricultural or
Johannes de Silentio
Property (Mann)
Fall 1998
Page 47 of 59
industrial area the population which makes necessary the granting of an injunction against a lawful
business and for which the business has no adequate relief.
Private Land Use Arrangements



There is virtually no unencumbered property. Encumbrances are omnipresent.
Law in this area is complex because it developed over time in response to different problems.
Problems disappeared but the ways around them had become enshrined and have been passed down.
Think of it in effect as private zoning.

Zoning is a lot blunter than easements, covenants and servitudes, in large part because zoning
always subject to underlying justification that it must serve public health, safety and welfare.
Private zoning restrictions don't need those justifications. All they need is the desire and the
ability.
Four kinds of servitudes

Minor

Profits

Licenses

Major

Easements

Covenants

Easements and profits are grants of interest in land.

Covenants are promises respecting use of land.

Profits

Right to take something off another person's land that is part of the land or a product of the land.

Easement to go on land is implied when profit is granted. Profit is usually in gross.

Licenses

permission given by the occupant of land allowing the licensee to do some act that otherwise
would be a trespass.
Restatement 512. License is an interest in land; comment e, but not always treated as such.
License may be created orally. No treated as an interest in land subject to Statute of Frauds.
Presumed to be personal and nonassignable, but if parties intend, it can be made transferable.
License can be revoked at any time at will of licensor, with two exceptions:

License with an interest in land.

Ex. O grants to A right to take timber from Blackacre, owned by O. A has an interest (profit a
prendre) and an irrevocable license to enter and take timber.

Bears some resemblance to easements by necessity

Estoppel.

If the licensee has constructed substantial improvements on either licensor's land or licensee's
land, relying on the license, in many states the licensor is estopped from revoking the license.

Criticism of exceptions.

Giving licensee the entitlement at no cost, permitting licensee to damage licensor to extent of
licensor's damage. Fairer remedy may be to permit licensee to continue the license upon
payment of damages to licensor.

Irrevocability exists only for whatever time is required to enable licensee to reap the fruits of his
expenditures.

Irrevocable license is like easement.




Johannes de Silentio
Property (Mann)
Fall 1998
Page 48 of 59
Holbrook v. Taylor

Facts.

While building their house appellees used haul road across appellants property with appellants
permission.

Court found during period of time use of haul road was neither adverse, continuous or
uninterrupted and therefore the alleged easement was not established by prescription.

No easement by grant; no easement by necessity.

Holding. Irrevocable license by estoppel.

Rule (License with interest in land). Where license includes the right to erect structure and acquire an
interest in the land in the nature of an easement by construction of improvements, the licensor may not
revoke the license after the licensee has exercised the privilege given by the license and made
expensive improvements.

Reasoning.

Right to use roadway is established by estoppel.

Use of roadway during the process of building their home, maintenance of the roadway and
construction of residence all with actual consent of appellants or at least with their tacit
approval, clearly demonstrates that license to use the subject roadway may not be revoked.

Discussion.

If Taylor's house burns down, can he build a new house using right of way across appellant's land?

Restatement of Property 519(4), says that a licensee may continue the use "to the extent
necessary to realize upon his expenditures."

Comment g. License is irrevocable "to the extent necessary to prevent the licensee from
being unfairly deprived of the fruits of expenditures made by him."
Restatement 3rd of Property, Servitudes, 2.10

A servitude may be created by estoppel.

Normally the change in position that triggers application of the rule state in this subsection is an
investment in improvements either to the servient estate or to other land of the investor.
Easements



Right of one landowner to use the property of another landowner. Typically between adjoining parcels
of land.
An Interest in land. Burden passes to subsequent owners of servient land.

Owner of easement has contract rights against original grantor of easement and also rights against
all successors to the grantor.

As interest in land, governed by the Statute of Frauds. Must be created by written instrument
EXCEPT in cases of part performance, estoppel, implication and prescription.
Types of easements.

Affirmative Easement.

Owner has right to go onto land of another (servient estate) and do some act on the land.

Example. O grants A right of way across O's property.

O's land = servient, A's land = dominant

Negative Easement.

Owner can prevent owner of servient land from doing some act on the servient land. (CB 851
- 854).

Traditionally four types. Easements (1) for light, (2) air, (3) subjacent or lateral support, (4)
interfering with flow of artificial stream.

New negative easements may be recognized. Can be treated as promise by servient owner not
to use his land in a certain way (real covenants or equitable servitudes).

Cannot be created by prescription until they somehow burden servient estate thus triggering
the statutory limit and the limit runs.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 49 of 59
Two forms of easements

Easement appurtenant.

If an easement benefits its owner in the use of another tract of land, it is appurtenant to that land.

Land benefited = dominant tenement; land burdened = servient tenement.

Easements are attached to the dominant estate and pass with the estate to any subsequent owner.

Usually involves neighboring pieces of land. Cannot be assigned independent of estate
assignment.

Example.

Whiteacre is located between Blackacre and a public road.

O, owner of Whiteacre, conveys to A, owner of Blackacre, a right to cross Whiteacre to reach
public road.

The easement over Whiteacre is appurtenant to Blackacre.

Negative easements are always appurtenant because it protects owner of easement in enjoyment
of land.

Owners of dominant and servient tenements can detach the easement and attach it to other
dominant land or convert into an easement in gross.

Benefit of an easement appurtenant is that it runs with the estates.

Usually increases value of dominant land more than it decreases value of servient land (increases
total value of land).

Easement in gross.

If an easement does not benefit its owner in the use and enjoyment of his land, but merely gives
him right to use the servient land, the easement is in gross.

"In gross" basically means not appurtenant.

"In gross" can still be assignable if both parties so intend. Does not mean easement is personal.

Example.

O, owner of Whiteacre, grants to Billboard, Inc. the right to erect sign on Whiteacre.
Billboard owns no land. The easement is in gross and is assignable (if parties so intend).

Decreases total value of land by amount of damage to servient tenement.

Commercial easements in gross are assignable. Non-commercial only assignable if parties so
intended.

Easements are normally appurtenant and so presumed.

Easements in gross do not exist in England.

Why easements appurtenant are favored

Intention. In the usual factual situation, the parties have a dominant tenement in mind. If the
easement serves to benefit its possessor in the use of a tract of land or enhance the value of a
neighboring tract of land, the easement is considered to have been intended to be appurtenant.

History. English court's refusal to recognize easements in gross influenced US to construe
against them.

Elimination of obsolete easements. Thought to be easier because the benefited party, who can
release it, will be more easily ascertainable than the owners of an easement in gross.

Easement appurtenant increases the value of the dominant land, presumably by more than it
defeases the value of the servient land.

To purchase an easement, the buyer will have to pay something more than the damage to
the servient tenement in order to strike a bargain with the seller. Thus, as easement
appurtenant increases the total value of the land.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 50 of 59
Creation of easements - 5 ways

Express grant.

Must satisfy Statute Frauds, i.e. written instrument signed by grantor. Oral grant is a license, not
an easement by express grant. Grantor's estate = servient, grantee's estate = dominant if
appurtenant.

Express reservation.

Easement may be reserved by grantor over land granted. If grantor conveys land, reserving an
easement, the land conveyed is the servient tenement.

In favor of grantor.

Under regrant theory, deed from O to A purporting to reserve an easement in O was treated as
conveying a fee simple absolute to A, who by the same instrument regranted an easement to
O.

Hence, A was treated as the grantor of a reserved easement to O.

In favor of third party.

Majority view. An easement cannot be reserved in favor of third party.

Minority allows easements to be created in favor of third person.

Note: The way around the bar to reserving easements in third parties is to convey using to
instruments, one to third party who then includes express reservation and then conveys to the
intended grantee. Third party's estate is then dominant and ultimate grantee's is servient. Use
two pieces of paper, put third party in position of the grantor

Example.

O wants to reserve easement for parking in favor of church across street. O conveys
property to church. Then, church conveys property back to A reserving an easement in
itself.

Implication.

Created by operation of law, not by written instrument.

Only possible in the very narrowly defined circumstances indicating that the parties intended an
easement or that an easement is a necessity.

Exception to Statute Frauds. All land involved must have been one tract at some time.

Triggering condition must have existed at the time of the division of the tract of land.

Two kinds:

Quasi-easement (easement implied from apparent existing use).

Prior to tract being divided, one portion functionally servient to the other and its
continued servience is reasonably necessary for enjoyment of dominant part.

Previous use must be apparent (not necessarily visible, if grantee could by reasonable
inspection discover existence of use).

Use must be continuous and necessary for enjoyment of claimed dominant tenement,
most jurisdiction requires reasonable and not strict necessity.

Easement by necessity.

Requirements

united ownership between dominant and servient estates

an absolute necessity AND

necessity existed at time of severance of the property.

Comments.

Easement by necessity last long as necessary.

Quasi-easement can last forever, even if necessity has disappeared. Owner of servient
tenement get to place it.

Necessity cannot be implied when land never owned by common grantor.

Prescription.

Created by adverse use for requisite period of time.

Analogous to adverse possession, with use substituted for possession.

Must be open and notorious use, adverse and under claim of right, continuous and
uninterrupted throughout requisite period.

Does not require exclusive use

Prescriptive rights cannot be acquired where use is permissive
Johannes de Silentio
Property (Mann)
Fall 1998
Page 51 of 59
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Continuous: does not mean constant (tacking allowed)
Necessity does not give rise to prescriptive easement b/c it is right
Cannot be used to acquire negative easements, easement by necessity, easement in public lands.
Estoppel

License becomes irrevocable through investment based on reasonable reliance creating an
easement.
Notes.

Grant for limited use, limited purpose, or of an unidentified space without clearly marked
boundaries, creates an easement, not a fee simple.

Sale of interest for less than FMV of a fee simple conveys only an easement.
Transfer of easements

Easement appurtenant.

When the dominant tenement is transferred, any easements appurtenant are transferred with it;
burden of easement appurtenant passes with servient land when transferred

Easement in gross.

Problems because if benefit of easement in gross is inherited by large number of people, it may be
difficult to secure a release of the easement or to clear up title.
Termination of easements

By unity of title.

If title to easement and title to servient land come into hands of one person, the easement is
extinguished.

Once extinguished, it is not revived by subsequent separation into two parcels.

By act of dominant owner.

Release. Owner of easement may release easement to servient owner by written instrument only.
Oral release (unless $ spent in reliance) ineffective

Nonuse. Mere nonuse does not extinguish easement.

Abandonment. If owner of easement acts with unequivocal intent to abandon easement, easement
is abandoned

Easement by necessity terminates when necessity ends.

By act of servient owner

Destruction of servient tenement.

An easement in a structure is terminated if the building is destroyed without fault of the owner
of servient estate. If building is destroyed by intentional act of servient owner, then easement
is not extinguished.

Prescription. If servient owner interferes with easement in an adverse manner, the servient owner
can extinguish the easement by prescription.
Willard v. First Church of Christ, Scientist

Facts.

McGuigan owns lots 19 & 20. Conveys 19 to Petersen.

Allows church to use 20 for parking.

Petersen deeds 19 & 20 in escrow to Willard upon Petersen obtaining 20 from McGuigan.

McGuigan wanted to convey 20 with easement for church use as parking lot.

Willard had constructive notice of easement.

Holding. Minority view - creation of easement in third party is allowed. Point in time that matters for
conveyances is transfer of deed and not execution of deed.

Reasoning.

Court looks at intent of grantor.

Also, Willard was not BFP without notice because easement was recorded in M to P deed.

Church is third party beneficiary of McGuigan to Petersen deed.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 52 of 59
Van Sandt v. Royster

Facts.

Bailey owned property - lots 19, 20, 4 from left to right - with sewer line originating in lot 4 that
crossed other lots to connect to street sewer.

Bailey subsequently sold lot 20 and lot 19 to separate buyers who both connected to sewer.

Later P moved into house already built on lot 19. D owned lot 20, Gray lot 4.

Sewer line leaked into P basement.

P sought injunction to prevent D from using lateral sewer. D claimed an implied easement.

Holding. Court said D had appurtenant easement in lateral sewer, so quasi-easement (by implication,
method to get remedy that court wants to impose). Court allows D to continue using lateral sewer.

Reasoning.

All three parties have property right and attached costs of having that right. Must pay for
maintaining the pipe. This is not an easement by necessity (requires strict necessity).

P is not BFP without notice. Charged with notice of lateral sewer b/c it is an apparent (not same
as visible) easement. Although it is not easily discoverable through routine inspection, court
wants to apply remedy.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 53 of 59
REAL COVENANTS (enforceable at law)

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




Covenant. Owner promises to do or not to do a certain thing relating to use of land.
If promisee sues promisor for breach, contract law applicable. If assignees of original parties to
covenant sue, property law applicable.
Remedy for breach: sue in law for damages..
Runs with estate in land at law, so that each person who owns the land subsequently is entitled to
enforce or is burdened by the covenant. Attached to the estate in land (burden passes to anyone who
takes the estate)
Negative promises that are not one of four permitted types of negative easements are given effect as
real covenants or equitable servitudes.
Covenant must touch and concern benefited and burdened land
Liability of original promisor after assignment.

If covenant is promise to do or not do some act on burdened land, covenantor has no liability after
assignment.

If covenant is promise to pay $, covenantor may be liable after assignment.
Promisor (or successor) is subject to personal liability for damages
BFP of burdened land is not bound at law if he has no notice of covenant.

Creation

Must be in writing; will not be implied nor arise by prescription.

Most deeds signed only by grantor, but grantee is bound by covenants in deed to be performed by
grantee.

General Privity Requirements.

Requires vertical privity estate for either burden or benefit to run.

Requires horizontal privity estate for burden to run.
Requirements for burden to run

Intent. contracting parties must intend that successors to the promisor be bound by the covenant.

Privity of estate.

Majority of courts require

Horizontal privity of estate between original promisor and promisee

Vertical privity of estate between promisor and assignee

Covenant must touch and concern the burdened land and benefited land

Notice. Subsequent purchaser of promisor's land is not bound by burden unless he has notice of
covenant before buying.
Requirements for benefit to run

Intent. Contracting parties must intend that benefit run to successors of the promisee

Vertical privity, but not horizontal privity.

privity estate between promisee and assignee is required,

but privity estate between original contracting parties not required

benefit must touch and concern land owned by promisee (benefited land)
Privity of Estate Defined

English rule

Horizontal privity only exists b/n LL and T

Mutual interest

Burden will run if one party has an interest (apart from covenant) in the land of other, they both
have an interest in the property, i.e. covenant must be coupled with an easement. (MA and couple
other states, same transaction or easement b/f covenant)
Johannes de Silentio
Property (Mann)
Fall 1998
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Page 54 of 59
Successive relationship (more widely accepted)

Privity exists where promise is contained in conveyance from one party to another (buyer and
seller).
Restatement

satisfied by either mutual or successive relationship
Touch and Concern

most courts permit affirmative covenants to run both in law and in equity; they usually are held to
touch and concern the land

negative covenants touch and concern b/c covenant not to do a physical act. Restrictive covenants also
enhance value of benefited land, even though they may not affect benefited owner in physical use of
his land.
Example:
(benefit)
A --------------horizontal privity-----------------B
C




(burden)
D
Assume B is promisor and A is promisee. Privity of contract between A and B.
For burden to run with the land:

First , there must be horizontal privity of estate between A and B.

Second, there must be vertical privity of estate between B and D.

Third, promise must touch and concern the land.

Fourth, must be intent of parties, i.e. grantee promises for her and her heir and assigns.
In this example therefore, unless straw conveyance is used to establish privity of estate between A and
B, burden will no run,
Benefit will run because it only requires vertical privity of estate.
Casebook Examples
1) Straw conveyance to create p/e. CB 862
a) B and A both convey interest in lots to X
b) X conveys interest with covenant to B, same to A.
c) Then, there is p/e between A and B.
d) Why do this? Ad antiquitatem
e) R.3d says there should be no more privity requirement. Just use servitudes. However, old way is
still dominant method.
2) CB 859 schematic
a) Between A, B, and C. For A to get C to honor B's covenant, A must prove that the burden of
covenant (between A and B) runs to C
i) horizontal p/e for covenant to run with land.
b) Between A, B, and D. For D to get B to honor A's covenant, D must prove that benefit of
covenant (between A and B) runs to D.
c) Between D and C. For D to get C to honor covenant between A and B, D must prove that benefit
and burden runs to C (between C and D).
Equitable Servitudes

Lack of reciprocity is in part what sets up equitable servitudes
Johannes de Silentio
Property (Mann)
Fall 1998
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Page 55 of 59
Covenant, whether running with the land at law or not, that equity will enforce against assignees of the
burdened land who have notice of the covenant.
Usual equitable remedy granted is injunction against violation of covenant, i.e. if promisee is seeking
an injunction against breach by assignee, seeking to enforce equitable servitude. Injunction gives
bargaining power to owner of servitude
Neither horizontal nor vertical privity required in equity, because enforcement is at equity and is
enforcement for interference in property interest regardless of who is doing the interfering.
Unenforceable against BFP without notice (actual, recorded, or inquiry)
Covenant must touch and concern benefited and burdened land
Creation
Statute of Frauds requires writing signed by promisor- acceptance of deed signed by grantor binds
grantee as promisor.

Exception: Negative equitable servitudes may be implied from common scheme for development
in residential subdivision.

Negative equitable servitude

(implied reciprocal negative easement)

May be implied from common scheme for development of residential subdivision.

Based on theory of equitable estoppel: where a purchaser, buying a lot restricted to residential use,
relies upon oral promise of subdivider to restrict other lots and makes substantial investment,
subdivider and any assignee of other lots are estopped to plead Statute Frauds.

Anyone who take property interest in burdened land is obliged to comply with servitude. Benefit
of servitude is like an easement appurtenant to benefited land and enforceable by any successor
possessor of that land.

Key to the finding negative equitable servitude is the existence of a scheme.

Evidence of scheme is variable. Can include but is not limited to:

recorded plat mat with restrictions,

developer exhibiting map or plat of entire tract to potential buyers on which restrictions
appear,

sales pitch made by developer regarding restrictions on the remaining land,

other statements made in sales or advertising information, and

insertion of similar restrictive covenant in substantial number of deeds prior to deed of
defendant.

Termination

If title to land benefited and burdened some into hands of one person, real covenant and equitable
servitude, like easements, merge into fee simple and cease to exist.
Tulk v. Moxhay

Facts.

Tulk sold Leicester Square to Elms, who promised for himself, his heirs and assigns not to build
on the square (negative covenant).

Elms conveyed to Moxhay, who had notice of covenant.

Moxhay wanted to build on the Square.

Tulk sues seeking damages or injunction.

Holding. Court grants injunction.

Rule. Outcome is law of equitable servitudes - applies only to negative covenants.

Reasoning.

Chancellor deemed it inequitable that covenant should be unenforceable against a subsequent
purchaser who acquired land with knowledge of restriction.

Moxhay probably paid less for the land than he would have had to pay for unburdened land. To
hold the covenant unenforceable would be unjust enrichment: give Moxhay an advantage he did
not bargain for.

Discussion.

Decision originated equitable servitudes.

Remedies for equitable servitudes and real covenants.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 56 of 59





e servitudes are enforced in equity with injunctions.
real covenants enforceable at common law with damages.
Successive privity of estate to does not work in England to create horizontal privity for running
covenants. Must be L/T relationship (tenurial privity).

Under this analysis, Transferees from Elms are not bound by promises Elms made to Tulk.

This case would not be a problem in USA.
In U.S. To enforce negative covenant requires privity estate b/n Tulk and Elms => successive
privity and Tulk can seek damages.
System is result of remedies fashioned to get around shortcomings of common law.
Sanborn v. McLean

Reciprocal negative easement is an equitable servitude.

Facts.

Common development owner McLaughlin conveys substantial number lots with restrictive
covenant saying only single family dwelling can be constructed on them.

McLean's lot was parceled out of common lot was 21st to be conveyed.

Conveyances of previous 20 lots had restrictions. 21st deed did not mention these
conveyances.

53 total lots are restricted, but all b/f McLean's lot were restricted.

McLaughlin conveys more lots, some with restrictions and some without restrictions.

McLean wants to build gas station.

Sanborn, fellow development resident, seeks injunction to stop construction.

Reasoning.
a) Court states that the scheme arose at time of first conveyance
b) Court said equitable servitude is binding on D b/c they had notice to inquiry about it.
i) Inquiry Notice. Schemes puts them on inquiry notice of reciprocal negative easement.
Considering character of use made of all lots open to D's view when he purchased, D was put
thereby to inquiry, beyond asking his grantor whether there were restrictions.
(1) Seeing use of land was restricted to residences only, he had notice to conduct further
inquiry.
(2) Upon inquiry into abstract of title, learns all lots b/f him were restricted to residential use.
(3) From these two facets, D should have known he was in fact subject to reciprocal negative
easement (equitable servitude).
ii) notice. "Restrictions were upon D's lot while it was in hands of common owners, and abstract
of title to D's lot show common owners and record showed deed of lots in plat restricted to
perfect and carry out general plan…"
c) If D's lot was 2nd and not 21st lot sold (came earlier), is he still bound by reciprocal negative
easement? Is he supposed to infer existence of development scheme from one conveyance?
i) Language of court shows that restriction on first scheme only could create scheme of develop
and thereby bind all subsequent conveyances.
ii) All court had to say was that scheme had arisen by time D's bought land.
Affirmative covenants to pay money: for improvement that benefits promisor by enhancing value of
property touch and concern even though improvements are on other land
Lien: covenant to pay money is enforced by action at law for breach contract. As an additional remedy,
deed often will retain lien on land to enforce the promise. If burden of cov does not run at law, so no
personal judgment can be obtained against assignee of promisor, land can be reached by equitable process
to satisfy the lien.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 57 of 59
Neponsit Property Owners' Association, Inc. v. Emigrant Industrial Savings Bank

Facts

P brought action to foreclose a lien upon land which D owns.

Neponsit Realty Company conveyed land to D's predecessor in title with affirmative covenant to
pay fixed sum each year, with such charge becoming a lien on the land when not paid.

D holds purchaser's property through foreclosure proceeding.

NPOA seeks to enforce the affirmative covenant.

Issues.

Does affirmative covenant to pay $ for use in connection with, but not upon, the land burdened by
the covenant, "touch and concern" the land?

Is there privity of estate b/n NPOA and bank?

Holding.

Three essentials of real covenant:

grantor and grantee intended covenant should run with the land

appears that covenant is one "touching" or "concerning" the land with which it runs

appears there is "privity of estate" between promisee or party claiming benefit of covenant
and right to enforce it.

There is privity.

Reasoning.

Language of covenant shows that parties intended covenant to run with the land. Need more than
intent.

Looking at intent and substantial effect of covenant rather than its form, covenant does touch and
concern the land. Burden should run with the land.

As for privity, although NPOA did not succeed to any property interest of Neponsit Realty.

NPOA is corporate plaintiff acting as agent of property owners.

Technically there is no privity, but we treat NPOA-relationship substantively, not
formalistically and find privity of estate b/n P and D.

Notice if Bonafide Purchaser without notice of servitude, he does not take subject to it

actual notice

record notice: if covenant is in deed to assignee's lot, this is record notice. If covenant is in deed
to other lots in subdivision conveyed by developer to prior grantees, assignee has record notice if
deed to neighboring lots are in assignee's chain of title.

inquiry notice: at least one court has held that purchaser buying into built up residential area where
houses appear to have been built in accordance with plan should look at other deeds out from
developer to see if any basis for implied cov exists. Lay of land puts him on inquiry notice to look
at the deeds of the neighboring lots.

Enforcement by third party beneficiary

Restatement: allows any third party beneficiary to enforce covenant in law or in equity if
contracting parties so intend

Using scheme to show benefit: if deed is silent as to who can enforce covenant, prior purchasers in
subdivision can enforce covenant if they can show the developer has scheme of substantial
uniformity in land use at time the prior purchasers bought, which they relied upon in buying in the
subdivision. From the uniform scheme it is inferred that developer intended to confer benefit
upon other purchasers in subdivision.

In states that imply burden on all lots in subdivision where there is scheme, benefit is for all
owners in subdivision.
Johannes de Silentio
Property (Mann)
Fall 1998
Page 58 of 59
Real covenants v. equitable servitudes

Differences

Remedy:
Real covenants = damages
Equitable servitudes = injunction/specific performance

Creation:
Real covenants = must be in writing
Equitable servitudes = can be implied

Privity:
run
Real covenants = vertical for benefit or burden to run, horizontal for burden to
Equitable servitudes = no privity required

Similarities:

Intent

Touch and concern

Not enforceable against BFP without notice
Common Interest Developments
"Quiet secession of the successful"
Background

Private regulations sought to achieve what zoning could not.

Things to keep in mind is that the rules have grown up around then are ways to regulate a new form of
community.

Thing that ties these communities together is the covenants in deeds. The rules can be broad or limited
depending on imagination of the people drafting them.

Home owner's association acts as private government right down to having own security forces.
Planned Unit Developments (PUDs)

When buying in a development like this, you buy home and lot in fee simple, also buy right to use
common areas, which are not owned by any individual owners. In this case the common areas are
streets, sidewalks, etc. Everyone has easement to use the common areas. Unless you set up some
mechanism to maintain them, they might as well belong to no one. Some entity must be responsible.
Create owners' association and fee a deed obligation.

For covenants to run to subsequent owners, there must be requisite privity and intent that they run and
covenants must touch and concern the land. They do not touch and concern in traditional was, but they
do touch and concern in a meaningful way, i.e. maintenance of common areas has direct impact on
individual lots.

There is also a traditional privity of estate problem because associations do not own anything. If the
courts held to traditional notions, would screw everyone who bought into neighborhood believing there
would be associations. Courts therefore reinterpret notion of transferring enforcement ability.

Associations have evolved into shadow governments. In many developments they replicate every
function of city government except they do it without limitations.
Condominiums

PUD in high rise.

Combination of individuals private ownership and common areas.

Essentially buying air space between floor and ceiling and four walls in fee simple.

All common areas are held in common, just like streets in PUD, i.e. covered by easements.

You can condominiumize virtually anything-parking spaces.

Financed like single family home-lenders are somewhat different.

Pay mortgage and monthly maintenance fee.
Johannes de Silentio
Property (Mann)
Fall 1998
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Page 59 of 59
Condo association is equivalent to home owners' association.
Notion that condo association must approve sale is generally enforceable. Condo association cannot
be unreasonable.
Some condo associations will write into condo association a right of first refusal allowing association
to buy at market value and resell to whomever it chooses. Allows control without property rights
interference.
Nahrstedt v. Lake Village Condominium Association, Inc.

Facts.

Homeowner in condo development sought declaratory relief from pet restriction provided in
development's CC&R's (covenants, conditions and restrictions).

Issue. When can a condo owner prevent enforcement of a use restriction that developer has included in
recorded declaration of CC&R's?

Holding. Pet restriction is not arbitrary but is rationally related to health, sanitation and noise concerns
legitimately held by residents of a high-density condo project. No facts support contention that burden
is disproportionate to benefit. No fundamental policy is violated.

Rule.

Restriction recorded in a developer's recorded declaration of CC&R's are treated as
"presumptively valid" or reasonable subject to statute.

Courts will not enforce restrictive covenant [equitable servitude] if it is arbitrary or when the harm
caused by the restriction is so disproportionate to the benefit produced by its enforcement.

The question is determined not by reference to facts specific to situation but by reference to
common interest development as a whole.

A restrictive covenant is disproportionate to benefit produced when it bears no relationship to the
land it burdens or violates a fundamental policy to the public at large. Equity will not enforce a
restrictive covenant that violates public policy.
Cooperative

Coop association buys entire building.

Coop association is incorporated, i.e. it is a legal person.

Buy share in coop association that corresponds to unit.

Buying right to live there in perpetuity, not fee simple.

Coop association mortgages entire building, blanket mortgage. Entire building secured. Payments are
made from tenants dues.

If one tenant falls behind in payment, burden is on other tenants. Joint-obligators.

Interdependence makes coop boards far more intrusive, financial information, personal interview.

Coop may refuse without reason.

Coop members generally have more income and greater net worth than condo purchasers.

Requirements may include 50% cash payment and net worth 3-5 times value of property.
Johannes de Silentio